Royal London has cut terminal bonuses on life and pensions with-profits policies in its closed Scott...
Royal London has cut terminal bonuses on life and pensions with-profits policies in its closed Scottish Life fund.
On a 25-year conventional with-profits life policy, for example, the final bonus has fallen from 45% to 37.25% from 1 September and has dropped from 25% to 19.75% on a pension policy of the same length.
Rates have fallen on 15, 20 and 25-year with-profits investments across the group's life and pension policies.
Group finance director Stephen Shone said this reduction is a result of an increase in liabilities relating to guarantees applying to certain policies in the fund, reducing the so-called demutualisation enhancement.
As a result, this has fallen, until further notice, from 1.25% to 0.75% pa for future and historic investment returns.
The group demutualised in 2001, at which point the fund closed to new business.
Final bonuses on 10-year with-profits life and pensions policies remain unchanged. Shone said that despite the reduction in final bonus rates for longer-term plans, policy values have still increased over the past year.
Based on a 25-year savings endowment policy, with a premium of £50 a month, maturing on 1 September 2006, the surrender value would be £43,095 compared to £39,129 a year earlier. This represents growth in value over the year of 8.5%.
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