The changes, made as part of Aviva’s mid-year bonus update, mean that the new business rate for bonds will be 2.75 per cent from July 1.
Final bonus rates for CGNU, CULAC, Provident Mutual and Aviva L&P funds have been reduced while MVRs have been reduced by an equivalent amount where they apply.
Aviva says the CGNU and CULAC funds had decreased 3.5 per cent, Aviva L&P by 4.1 per cent and Provident Mutual by 0.8 per cent.
A statement released today says these changes are “part of the prudent management of the fund, creating a balance between paying out to customers today and ensuring future performance”.
Regular bonus rates have been held on all conventional policies and Aviva Life and Pensions UK Ltd and CU unitised policies.
Aviva marketing director David Barral, says: “Aviva’s with-profit funds continue to provide investors with attractive returns while protecting them from the extremes of volatile equity markets.
“Despite market conditions, customers invested in Aviva’s main with-profit fund would have received a higher return than investing in an average savings account or average balanced managed fund, two of the most popular alternative investment options.”
Axxis Financial Planning director Owen Wintersgill says: “I think the importance of the move depends on where historically they put the emphasis, either between the yearly reversionary bonuses which once they’re added cannot be taken away, or the discretionary terminal bonus where it is added at the end of the life of a policy.
“Some life offices hold back on the yearly guarantee bonuses and put the emphasis on the final terminal bonus which effectively starts to make a with-profits fund more like a unit-linked one. Whereas other life offices have historically placed the emphasis on those yearly bonuses so effectively the fund ratchets up.
“Scottish Widows for instance put its emphasis on that final terminal bonus, so if Aviva is slashing their terminal bonus it is a big blow to policyholders. But if Aiva has historically been more generous with its yearly bonus then it is less of a knock.”