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AMP slashes payouts by 15% as profits rise

AMP Pearl is cutting payouts on with-profits life policies by 12.5 per cent and by 15 per cent on with-profits pensions.

AMP UK Financial Services managing director Tom Fraser says the move is in line with what other companies are doing but accepts that the cuts could be seen as the introduction of market value reductions through the back door. The Pearl fund does not permit MVRs.

AMP intends to transfer all its with-profits business to Sandler-friendly ringfenced with-profits funds which are less capital-intensive.

It has not decided whether to restructure the Pearl fund or write all business through the 100/0 NPI fund.

AMP says it stands by its endowment promise to make up shortfalls although it cannot say how much this will cost. It has injected £400m into the UK business and the Pearl fund has reduced its exposure to equities to 35 per cent.

A 20-year £50 a month endowment maturing in October will pay out £33,557 compared with £38,345 in February.

Pearl with-profits business has been sold only through its direct salesforce.

AMP&#39s half-year business figures show profits for the UK business rose by 7 per cent to £64m from £60m.

Fraser says: “These are good results in a pretty tough market which has fallen by 47 per cent. Other people have introduced surrender penalties and MVRs. You could look at the cuts as doing the same. We have access to our Australian parent which can raise capital. We would still be solvent if the FTSE fell again by as much as it has.”

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