L&G cuts with-profits bonus rates

Legal & General has cut bonus rates by 0.25 per cent on average for with-profits customers while payout values have increased by around 5 per cent.

The provider says while bonus rates are down slightly on average, compared to 2010, this is dependant on product type and entry date.

The bonus rates for conventional endowment business, including mortgage endowments, were held at 1.25 per cent, the same as last year.  But on average, for unitised pension business, and L&G’s income and growth bonds, bonus rates were cut by around 0.25 per cent.

Its with-profits fund returned 1.7 per cent before tax on assets held for with profits last year.

A male with-profits pension customer retiring at age 65, paying £200 a month, would have seen a 5.3 per cent increase in the payout value compared to the previous year for the 10-year plan term, 5.2 per cent for the 15-year plan term and 4.7 per cent for the 20-year plan term.

L&G with-profits actuary Tim Sheldon says: “In current market conditions the core features of with-profits, which combine a balanced asset mix with smoothing of investment returns and underlying guarantees, mean with-profits remains a good choice for investors seeking steady growth from a spread of investments over the longer term with some downside protection.”