Prudential is cutting the payouts on its with-profits endowments and other investments by up to 10 per cent, it has announced, due to "exceptional market conditions."
In the 12 months between May 2008 and May 2009, Prudential has announced that mortgage endowments
will payout up to 9.5 per cent less, while its 20 year pension plan will payout 9.3 per cent less this year.
Investors into a 25 year, £50 a month Prudential mortgage endowment, which was originally with Scottish Amicable, for example, will find that their investment
now pays out £38,707 – 9.5 per cent less than the £42,150 it would have done a year ago.
The announcement from Prudential follows similar ones from other firms, such as Legal & General, which announced last week that it would be cutting its endowment payouts by up to 9.5 per cent.
Standard Life, Norwich Union, and Friends Provident have also all announced sharp falls in bonus rates and consequent payouts.
Prudential has announced that it will be adding a £2.8billion bonus to the value of its with-profits policies, to soften the blow, so they will fall by up to 10 per cent instead of the full 29.9 per cent that the FTSE has fallen in the same time frame.
Prudential's with-profits "continues to be an attractive medium to long-term investment when compared with alternative investment options," the financial services company claimed in a statement.
The company's "strong with-profits fund has once again sheltered policyholders from the full impact of the extreme volatility seen in world markets", it said.
David Belsham, chief actuary at Prudential said: "Although investment markets have performed very poorly in 2008, our policyholders have been protected from the full impact of the market falls."
"We believe the bonuses announced today are prudent and will protect the ongoing interests of our current and future policyholders." Mr Belsham added.
"Our overriding priority has always been to maintain the long-term financial security of the Fund and to continue to deliver strong performance for the benefit of our customers."
© Fair Investment