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Endowment cheer for MGM policyholders

Phillip Inman
Saturday March 20, 2004
The Guardian

Mutual assurer MGM Assurance this week gave its with-profits policyholders some cheer with the announcement that its 25-year with-profits endowment policy maturity payouts had fallen less than 3% compared to last year.

The company said it was able to prop up its payout rates after the with-profits fund returned an annual growth of 9.3% per annum net of tax, which had outpaced the average inflation rate of 3.7% over the same period.

A 25-year with-profits endowment policy maturing on 1 April 2004, taken out by a 29-year-old male non-smoker, paying a premium of £50 a month will be worth a total of £55,846. The company said the fall of less than 3% compared with the same policy maturing in 2003 contrasted with household names such as Prudential, Standard Life and Norwich Union which have all reduced their 25-year endowment payouts by at least 10% compared with last year.

The results contrasted with Eagle Star which this week joined the long list of life in surers that will only publish their bonus rates, refusing to give information to the press about typical payouts. These companies based their decision on the fact that their with-profits funds are closed to new customers, but critics say the the lack of information is designed to prevent them from appearing at the bottom of comparative tables.

An Eagle Star spokesman said conventional with-profits life policies will receive reversionary bonuses of 0.25%. Customers with pension plans, however, will be even bigger losers. There will be no bonus for conventional with-profits pension policies this year. Conventional life and some conventional pension policies, which mature during 2004 will receive a terminal bonus, the company said, but it refused to say how much.

Eagle Star's annual bonus rate for its Series 5 unitised with-profits fund is 1% for life policies and 2% for pension policies. Bonus rates for Eagle Star's other unitised with-profits policies vary between 0% and 4%.

 

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