Norwich Union has delivered bad news to its with-profits endowment policy holders as it has been forced to slash final bonuses by as much as 10 per cent in some cases.
The insurance giant that is now part of Aviva blamed 'poor investment conditions' for the move that could reportedly leave endowment
policy holders missing out on cash payments of around £2,000.
The cuts will hit more than two million policies in total as all four of Norwich Union's with profits funds find themselves affected. Its largest funds NULAP and CGNU have not escaped unscathed.
In fact, the CGNU funds made an overall return of -7.3 per cent before tax as of June 30 2008. Speaking of the profit cuts chief actuary at Norwich Union, John Lister said:
"We have reduced final bonus rates because equity markets, commercial property and corporate bonds have fallen significantly in value since the beginning of the year.
"We are taking responsible action to reflect the market movements over the past nine months."
Norwich Union operates a system that pays out less to policyholders during good investment years in order to pay out more during bad times. And, as it negotiates through a credit crunch and potential recession it has had to act cautiously.
Mr Lister added: "We need to ensure that those policyholders who leave the fund do not take more than their fair share at the expense of those customers who remain in the fund."
The bonus slashes began earlier this week, nevertheless, Norwich Union remains optimistic, claiming that many endowment policy holders will still see growth. According to Norwich Union statistics a 25 year £50 a month endowment mortgage
that matured on Sept 1 would have paid £42,885 compared to the £39,214 a policyholder would have received the year before.
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