Millions of Standard Life policyholders, who were recently told the company was struggling to meet new solvency rules and would have to review its mutual status, received more grim news yesterday in the form of sharp bonus cuts. Some bonuses have been halved and payouts have been cut back by an average of 7 per cent since the last bonus cuts in August.
Compared with this time last year, payouts are down about 20 per cent for an endowment policy. Since 2001, payouts on a typical endowment policy have come down by 45 per cent. An endowment will now pay out £62,603, compared with £75,984 in February 2003. Personal pensions have seen a 24 per cent reduction since the start of 2003.
Most insurers have had to cut bonuses as falling stock markets, in which the majority of with-profits funds are invested, have reduced the amount they can afford to pay out. Even though the stock market rose last year, with-profits policies are still feeling the effects of three years of falling markets before then.
Norwich Union, owned by Aviva, told policyholders earlier this month payouts would be 5 to 10 per cent down on last year.
Ronnie Sloan, an Edinburgh actuary and policyholder, said yesterday: "While Standard's returns are still good in absolute terms, their payouts have been cut back dramatically over the past two years. In times of low inflation, a gradual reduction in returns is only to be expected, but Standard's recent cuts go rather further."
Standard's 1.3 million mortgage endowment customers were also braced for a rise in the shortfall between their policy value and their loan. Under new FSA solvency rules, Standard can no longer include a top-up payment, which it calls the "benefit of mutuality", in policy illustrations.
Standard also saidKeith Skeoch, its chief investment officer, will act as temporary chief executive of its asset management arm after Sandy Crombie moved to replace Iain Lumsden as chief executive of the entire group.Reuse content