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Axa blames modest recovery as terminal bonuses are cut

Axa has cut terminal bonuses by over 5 per cent on its Axa Sun Life and Sun Life Assurance Society with-profits funds.

The cuts affect policies maturing from October 2004 and follow reductions in annual bonuses announced in March, when Axa Sun Life unitised bond returns were cut by 9.3 per cent, personal pensions by 14 per cent and endowments by 15.7 per cent.

Axa says about 16,000 policies due to mature will be affected by the changes.

Rates will be reviewed again in March 2005. Bonds are not affected by the latest review.

A male aged 30 paying monthly premiums of £50 into a conventional mortgage endowment policy over 25 years will see the maturity value fall by 5.3 per cent to £46,689 compared with £49,323 in September.

On a conventional personal pension, a 45-year-old paying monthly premiums of £200 over 20 years will see a 5 per cent fall in the maturity value from £147,196 to £139,777.

Regular and interim bonus rates on all products remain unchanged. Axa says annual returns on 20-year pension policies stand at around 10 per cent and 8 per cent on 25-year endowment policies.

Chief actuary Peter Shelley says: “The stockmarket recovery has been modest relative to the severity of the falls experienced between 2000 and 2003. As a result, this change to terminal bonuses is needed to ensure that our with-profits payouts remain fair to all policyholders and properly reflect investment conditions.”


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