The Actuarial Profession has cast a gloomy outlook for people holding long-term policies such as 25-year mortgage endowments seeking with-profits bonuses during this month and next.
The Profession says policyholders seeking generous payouts from the late 1990s would not have much to be joyful about.
Policyholders should not be surprised: the body warned last year that "payouts are continuing to fall and are set to do so for a number of years yet.”
With continuing low yields on gilt-edged stock and the negative returns resulting from investing in equities between 2000 to 2003, that forecast has been well warranted.
Additionally, weak stockmarkets have forced life companies to sell equities in 2002 and 2003 in order to meet the FSA’s strict solvency requirements, leaving them with smaller equity holdings from which to profit as markets have strengthened.
The Actuarial Profession says investment returns will not reach levels of the 1980s and 1990s anytime soon.
This means payouts from with-profits policies will continue to fall until the policies affected by the good returns of those earlier decades mature, with longer term policies being hardest hit for years to come.
Nigel Masters, chairman of the Actuarial Profession’s Life Board, says: "Policyholders are seeing the results of lower returns in terms of reduced bonuses now and, in all likelihood, for several years to come. With a lower inflationary outlook, the real returns from with-profits policies may nevertheless remain competitive with those from other investment choices."IFAonline
Slendebroek CEO since 2014
For clients and social change
Our weekly heads-up for advisers
According to Cicero report
Adds 24 staff, three offices and £275m AUA