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Bond rate boosted but Widows makes WP cuts

Scottish Widows is cutting bonus rates on many of its with-profits policies in line with rival companies, with changes taking effect from January 1.

Unitised with-profits life and pension policyholders will see regular bonus rates down by between 0.5 per cent and 1 per cent while regular bonuses on conventional with-profits life polices remain the same.

However, most conventional pension policies will see no regular bonuses, with final bonuses on with-profits policies down generally.

The changes mean that a with-profits endowment policy taken out by a non-smoking male aged 29 and paying £50 a month over 25 years will now pay out £49,272 compared with £59,762 on February 1, 2003.

A with-profits personal pension policy held by a male paying £200 a month over 20 years will now pay out £109,559 compared with £128,034 on January 1, 2003.

At the same time, cash-in values for investors redeeming early have risen by up to 9 per cent over 2003, with regular bonus rates on the flexible options bond growth fund up from 4 per cent to 5 per cent.

Regular bonuses on new business into the flexible options bond income fund are up from 3.75 per cent to 4 per cent.

Actuarial director Adr-ian Eastwood says: “A partial recovery in stockmarkets over the last 12 months has enabled Scottish Widows to increase bonus rates on the flexible options bond growth fund. However, stockmarkets still have a long way to go before they get back to previous levels.

“As a result, further reductions in regular bonus rates are necessary for those types of policy that have experienced the eff-ects of sustained falls in asset values.”

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