Royal London has reported a 65% drop in returns in its with-profits fund before tax for 2007.
The UK mutual life and pensions firm today says the fund returned 3.9% in 2007, a fall from the 11% recorded in 2006.
It adds annualised returns on its £50 a month 25-year with-profits endowment maturing on 1 January, 2008 totalled 8.4%, representing a real return of 4.9% a year over inflation.
The company increased the bonus rates on some of its life and pensions policies but kept those across its with-profits policies static.
In Februrary, Royal London announced it had seen a 1% drop in life and pensions new business in 2007.
It attributed the fall to a downturn in the mortgage market and “tough conditions” in protection.
Commenting on the economic outlook for the rest of 2008, Stephen Stone, Royal London Group finance director, says: “The investment outlook continues to be dominated by low inflation and interest rates.
“I expect that the future headline returns on investments will be comparatively low by the standards of the last 25 or 30 years.
“Nevertheless the arguments for investing in real assets over the long term remain strong.
“Over the long term, real assets - such as those backing our with profits fund - have delivered above inflation returns for investors.”
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