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L&G puts bonus rates on hold despite 12.8% return

Legal & General has held the annual bonus rates on its conventional with-profits funds, despite assets returning 12.8 per cent over the year.
Around 200,000 of L&G’s 660,000 with-profits customers hold a conventional policy.

L&G with-profits actuary Carl Dowthwaite says the decision will allow the firm to maintain flexibility when investing in equities and property. He says: “Holding the annual bonus rate gives us a little bit more investment flexibility. Last year, equities and property performed a lot better than fixed interest, so it benefits customer to have a relatively high proportion of funds in those sort of assets.”

L&G says it currently invests 56 per cent of funds in the two asset classes.

The company says because 25-year mortgage endowment policies are maturing in surplus, final bonus rates will deliver payouts ahead of target.

There have been a string of with-profits policy reviews from pension providers recently.

In January, Friends Provident held the guaranteed bonus rate on its main unitised with-profits fund at 3 per cent after achieving returns of 13 per cent.

This was followed in February by Standard Life’s confirmation that 500,000 with-profits customers would see their annual bonus rate cut despite the funds achieving double-digit returns.

Aviva subsequently announced that annual bonus rates for its two million with-profits customers would be frozen despite a 12 per cent increase in the value of the company’s main fund.

AWD Chase de Vere head of communications Patrick Connolly says L&G’s with-profits bonus declarations “are pro- bably the most positive we have seen to date”.

He says: “After a strong year for investment markets, some with-profits providers are still cutting annual bonus rates and payouts. However, it is pleasing that L&G has maintained bonus rates at current levels.”

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