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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.”

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