Norwich Union slashes returns
The cuts - the fourth round of reductions in 18 months - come despite the company's £50bn with-profits fund notching up an investment return of 11.5% before tax in 2003.
Its policyholders have enjoyed mixed fortunes. Around 130,000 policies of varying types will mature this year, and of these about 100,000 are expected to suffer a payout cut. Some pension policyholders will see their maturity payouts reduced by as much as 11%, which will mean them receiving thousands of pounds less than they were expecting.
A typical maturing £50 a month, 25-year General Accident endowment will from this month pay out £62,888, down from £66,394 for an equivalent policy in July 2003, £70,025 a year ago and £85,518 in August 2002. These figures are for savings endowments - for mortgage endowments, the new typical payout figure is lower, at £59,444.
Almost 200,000 people, the vast majority of them holding old-style "conventional" with-profits pension plans, will get no annual bonus this year. Lower annual bonuses mean investors will see their money grow more slowly.
But for some other policies, payouts and bonus rates have been maintained at 2003 levels, and Norwich Union said that despite concern about underperforming mortgage endowments, many customers with 25-year policies maturing this year will be enjoying payouts well in excess of their target amounts. "The growth in the stock market will lead to some improvement in the position of mortgage endowment policies," said the insurer. "As a result, many policyholders would see slightly lower projected shortfalls or slightly higher projected surpluses now."
Norwich Union has 1.2m mortgage endowment-holders and 1.2m pension customers. It said with-profits policies continued to offer "excellent" returns. A 25-year savings endowment has returned 10.1% a year after tax - a real return of 6.4% a year.
The strong investment performance means those who bought a with-profits product during 2003 benefit from both an annual and a final bonus being declared on their policy.