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L&G cuts bonuses as life profits rise by 7%

Legal & General has cut with-profits bonus rates despite achieving a 14 per cent investment return on with-profits assets last year.

The company says returns in 2003 were in excess of its longer-term expectations but negative returns in 2001 and 2002 were well below expectations so smoothing means this has not yet been fully reflected in bonus declarations Annual bonuses on conventional endowment policies have been cut to 0.75 per cent of the sum assured and to 1.25 per cent of the existing bonus.

The payout on a 25-year with-profits endowment policy for a male aged 29 paying in £50 a month falls by 10 per cent to £53,333 from £59,047 last year. A 20-year pension plan paying £200 a month will pay out £129,431 compared with £138,457.

Operating profits at the L&G group increased by 9 per cent last year to £759m from £695m in 2002. UK life and pension operating profit rose by 7 per cent to £537m from £501m.

Group chief executive David Prosser says L&G&#39s financial strength will be reinforced when it publishes its realistic balance sheet in April. He says this will show that its UK with-profits business has assets “comfortably” in excess of liabilities, with its risk capital margin covered at least four time by its surplus assets.

Chartwell Investment Management business development manager Ben Willis says: “The cuts reinforce the statement that they still think there is a future for with-profits although that could change. This is to be expected. You are not going to be looking for any bonus increases from the big three players.”

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