Standard Life has become the latest in a long line of investment providers to announce cuts to its final bonus payouts on a range of with-profits products including endowments, pensions and savings.
The news broke yesterday of an immediate cut to final bonuses on its pensions
, endowments and bonds
, and has been followed by news today that the Edinburgh based life and pensions giant is riding out the financial storm with a surplus of £3.4billion.
The announcement of Market Value Reductions (MVRs) mirrors Legal & General's decision last week to cut its with-profits final bonuses by between five and nine per cent, slightly less than Norwich Union which announced cuts of 10 per cent in September.
The cuts will mean that a 25 year, £50 a month mortgage endowment
will now pay £32,932, compared to £34,701 before the cuts took place, a fall of more than five per cent.
Commenting on the bonus cuts, with-profits communications manager at Standard Life Assurance Limited, Margaret Flaherty: "Investment returns have generally been poor over the last year, but particularly so since August, resulting in today's decision to reduce final bonuses and extend MVRs. The changes that we have made today will ensure that we maintain fairness between planholders who choose to leave with-profits, and those who remain invested until their plan maturity or retirement date."
Despite the cuts, Standard Life argues that the with-profits policies still offer some protection against the current financial turmoil. Ms Flaherty added: "Despite today's changes, with profits plans are still providing some protection against market volatility for customers approaching maturity and retirement."
Defending Standard Life's strong stance in difficult times, despite the cuts, group chief executive, Sandy Crombie, said: "I am pleased to report that Standard Life has produced a solid performance in the first nine months of 2008, despite the market turbulence. The conservative investment management policies we have adopted over the past few years have resulted in a balance sheet that is both strong and resilient."
© Fair Investment Company Ltd