Legal & General has become the latest in a long line of with profit policy providers to slash its final bonus rates on policies including endowments and pensions.
The news follows 'poor investment conditions and turbulence in the markets in 2008' and will affect the final payouts to Legal & General customers. Payouts will be cut by between 5 and 9 per cent.
According to key figures, the overall investment return after tax on assets backing L&G's life with profits policies was down by around 14 per cent on October 13 compared to January 1 this year.
Both with profit pensions
will be affected by the cuts, a 25 year, £50 a month endowment mortgage
maturing after the cut will now pay £38,565 compared to £41,293 before the cut. Pensioners with a £200 a month pension maturing now will receive £90,999 compared to £98,511 before the cut.
Commenting on the cuts, managing director of with profits at Legal & General, Mark Gregory said: "We have made the decision to reduce final bonus rates to take account of some of the negative movements in the investment markets. Through smoothing we are protecting our customers from the full impact of these market falls."
The process of smoothing is common when it comes to with profits as it can even out payments through good and bad financial times. Mr Gregory added: "In making these changes we are ensuring fairness between all of our customers, whether they are leaving or remaining in our with profits fund."
Since January this year Standard Life, Norwich Union and Friends Provident have all cut their with profit final bonus rates by as much as 10 per cent.
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