Norwich Union is cutting policy payouts by up to 10 per cent although its with-profits fund saw a return of 11.5 per cent last year.
The company has maintained many of its regular bonus rates. However, conventional Norwich Union Life and Pensions life and investment policies with terms of 20 years or more will see payouts cut by 5 per cent although payouts for 10and 15-year terms are unchanged.
Commercial Union and CGNU life and investment payouts will drop by between 3 and 7 per cent.
NU conventional pension payouts will fall by up to 10 per cent. Commercial Union regular-premium pension payouts for 15-year terms are unchanged but payouts on other terms drop by between 5 and 10 per cent. CGNU pension payouts are down by 10 per cent.
NU senior actuary David Riddington expects the “drift down” of rates to continue for a number of years due to poor stockmarket conditions over recent years and the dropping out from policy terms of the good years but says the underlying value of policies are still strong.
Riddington says: “We expect to continue to get good returns from with-profits. We are positive and optimistic about its future. Whatever may happen with Sandler or what develops, we believe with-profits has a part to play still.”
Chartwell Investment Management investment analyst Ben Willis says: “It has maintained bonus rates on its new product that was launched in July, which is good news for investors, but it has cut the rates for people who have invested for a longer period. Obviously, they would be asking why they are being penalised.”