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MVRs cut and final bonuses boosted

Friends and NU cite strong WP returns.

Friends Provident is to remove all remaining market value reductions on its with-profits policies and has increased final bonus rates on most funds.

Norwich Union has reduced MVRs and aims to remove them altogether although money invested in 1998 is no longer subject to an MVR.

Friends Provident says the gross investment return on its with-profits funds was 8 per cent in 2006. At NU, the CGNU with-profit fund achieved an overall return of 11.7 per cent before tax.

Returns were driven by a fourth consecutive annual rise in the FTSE All Share index and continued strong performance from commercial property.

Friends chief executive Ben Gunn says: “We are ensuring the fair treatment of all our with-profits customers. We are in a low-inflation/low-return environment but our balanced investment strategy, as well as the underlying principle of with-profits, has given policyholders a steady return.”

NU says most final bonus rates have risen and a total of £1.3bn was added as bonuses during last year.

Norwich Union marketing director Crawford Davidson says: “Returns from the stockmarket and commercial property continued to be strong in 2006 and, as a result, most final bonus rates have increased significantly, with all policies increasing in value in 2006.

“Market value reductions were reduced twice last year. They have again been reduced at the start of this year and we aim to remove them completely as soon as the stockmarket allows.”

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