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Clerical cuts up to 19% off WP bonuses

Clerical Medical has cut up to 19 per cent off the value of its with-profits policies.

It blames the cuts on severe investment conditions and accepts that there will be many policies left without terminal bonuses in addition to those policies which had their bonuses wiped out after Clerical&#39s bonus declaration last August.

The company has cut the annual bonus to 3 per cent from 4 per cent for life policies and to 3.5 per cent from 4.5 per cent for pensions.

A £50 a month 25-year endowment would now pay out £68,142 compared with £98,810 a year ago. A 10-year £100 a month pension is now worth £14,956 compared with £17,721 a year ago.

Clerical has also increased its market value reduction by up to a maximum of 25 per cent for post-1995 policies. Policies taken out before 1995 do not have an MVR.

Clerical says its with-profits fund lost 7.9 per cent last year compared with stockmarkets losses of 20 per cent. It attributes this to diversification in its fund. As of the end of last year, equities made up 47 per cent of the fund but the company says this could come down further. Clerical says it remains committed to the with-profits market.

With-profits actuary Alan Morris says: “We are just doing what other companies have done to with-profits. I do not think it has ever been sold as a low-risk product and we have always been careful to manage expectations.”

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