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Now Royal and Sun slashes bonus

Feb 6th 2003

Northern Business Daily

By The Journal


Royal & sun alliance is the latest insurer to slash bonuses on its long-term savings policies, blaming difficult stock market conditions.

It is the third cut in a year for bonuses on the group's conventional with-profits policies and the fifth for unitised ones.

Investors with a conventional life or pensions policy will see the maturity value of their fund fall by an average 5pc after the cut to both annual and terminal bonuses.

The maturity value of the policies has fallen by an average of 15pc and 19pc in the past year, with some investors losing 22pc after successive bonus cuts.

Chief actuary Mike Kipling said: "Over the last three years, there has been the most sustained downturn in share markets worldwide for over 50 years. During this time UK share prices have fallen by 42pc, of which 25pc was during 2002 alone. Returns on the assets underlying our with-profits funds have not been sufficient to sustain bonus rates at current levels."

The move means someone who paid 50 a month into an endowment for 25 years will see its maturity value fall to 66,262 from 70,746 before the cuts, and down from 82,685 if the policy had matured this time last year.

Annual bonuses on unitised with-profits bonds have been cut by 1.5pc to between 1pc and 2.5pc.

The surrender value of a unitised with-profits bond in which 10,000 was invested five years ago has fallen to 10,961 from 13,865 a year ago.

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