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Clerical bonuses cut by up to 20%

Clerical Medical is the latest life office to slash reversionary and terminal bonuses on its with-profits policies, with cuts of up to 20 per cent.

Blaming market conditions, Clerical has cut bonuses on its life and flexible bond policies to 4 per cent from 5 per cent. On pension plans with an annual management charge of 1 per cent, bonuses are cut to 4.5 per cent from 5.5 per cent.

Bonuses on pension plans with an AMC of 0.5 per cent have dropped to 5 per cent from 6 per cent.

The effect of the changes on a typical £100 a month 10-year pension plan is a payout at retirement of £17,721 on February 1, 2002 compared with a payout of £19,327 on August 1, 2001.

On Clerical&#39s with-profits bond, a five-year £10,000 investment would pay out £13,753 on February 1, 2002 compared with £15,631 on August 1, 2001.

Clerical says the cuts reflect the prudent management of its with-profits fund and the poor performance of the stockmarket over the past two years. Despite the raft of bonus cuts by life offices over the past few weeks, Clerical says with-profits fund remains a strong investment.

Chief executive John Edwards says: “There is continuing media attention on with-profits business. We firmly believe that it remains a sound long-term proposition and that investors can achieve good results that outperform many other savings and investment products.”

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