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Equity falls hit Widows’ WP bonuses

Scottish Widows has cut bonuses by up to half after its with-profits fund fell by 17.5 per cent in 2008 due to a 54 per cent exposure to equities and property.

Widows has reduced regular bonus rates on most of its conventional and unitised with-profits policies by half. Final bonus rates for conventional and unitised with-profits contracts have fallen as much as 63 per cent compared with 2008.

With-profits actuary Kevin Doerr says: “2008 was a very difficult year for global markets and has highlighted the advantages of a diversified investment strategy, smoothing and with-profits guarantees. Coming into 2009, the with-profits fund held 54 per cent in equities and property, a balance between prudent management and being well positioned to gain from market recovery by retaining significant exposure to these asset classes.”

Hargreaves Lansdown pension analyst Nigel Callaghan says: “The with-profits fund took a pretty big hit due to its high equity exposure but if markets bounce back, it is well positioned to benefit.”


Truestone in gilt alert

Truestone is concerned that sovereign bonds could burn yield-seekers this year and is looking to gradually reduce its clients’ exposure to the sector.


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