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AMP axes annual and terminal bonuses on NPI policies

AMP is scrapping annual and terminal bonuses for 120,000 NPI with-profits policyholders, blaming the rising cost of guaranteed annuity options.

Two million Pearl endowment holders with conventional with-profits policies will have last year&#39s 2.25 per cent annual bonus reduced to zero. Payouts across AMP UK&#39s with-profits range will be slashed by 20 per cent. Annual bonuses will be between 0 and 5 per cent.

The NPI products which will not get annual or terminal bonuses are largely section 226 and executive pension plans extensively sold by IFAs between 1971 and 1988. AMP says it has acted because of the guarantees within the contracts.

But NPI&#39s new ringfenced with-profits policies get a high annual bonus of 5 per cent for pensions and 4.5 per cent for bonds.

Insurance analyst Ned Cazalet says: “The old NPI would have gone the way of Equitable if it had not been rescued but that rescue comes at a price. The bonus cuts are not a surprise as we have seen companies like Norwich Union not paying bonuses and I expect to see others not doing so.”

AMP UK chief actuary Peter Carr says: “The decision to limit increases in guaranteed benefits further strengthens the with-profits fund and protects policyholders.”

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