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Axa and CIS cut WP bonuses with other firms set to follow

Axa and CIS kicked off the new year by imposing a new round of bonus rate

cuts for with-profits policyholders and IFAs predict that more companies

will follow.

For Axa, the 5 per cent cut on payouts on with-profits bonds is the fourth

unscheduled bonus cut since its annual declaration last March when it

introduced a cut of between 4-5 per cent.

This was followed by cuts of 4-5 per cent in June, 3-6 per cent in July and

2-8 per cent in October. Overall, Axa estimates that the value of an

average £20,000 with-profits bond is down by 17 per cent.

Last June, Axa said it would not be selling with-profits bonds but it

continues to write with-profits pensions. These have fallen by 10 per cent

over the year and there have been only two interim bonus cuts.

CIS has made its second interim payout cut of 5 per cent following similar

action in October last year.

Axa Sun Life chief actuary Peter Shelley says: “With-profits payouts are

still high relative to actual investment performance and, like many of out

competitors, we need to ensure that all of our customers are treated fairly

and continue to meet policyholders&#39 reasonable expectations.”

CIS chief actuary Tim Bunch says: “2002 has been a difficult year for

investment markets. By reducing maturity values, we are ensuring that

policyholders get payouts which reflect more fairly what their savings have

earned.”

Chartwell Investment Management director Patrick Connolly says: “We expect

a lot more of this sort of thing. I hope by the end of the first quarter

that all the cuts which need to be made will have been made unless the

markets plunge further.”

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