Norwich Union has slashed annual bonus rates on its with-profits products by 25 per cent but remains upbeat on the outlook for the asset class.Bonus rates on its closed NULAP/CULAC funds, in which the majority of its three million policyholders are invested, were reduced from 4 per cent to 3 per cent, bringing them into line with rates on the £25bn CGNU fund, which is still open to new business. This equates to a payout of about £1bn to policyholders. NU has also reaffirmed its commitment to make up any shortfalls on mortgage end-owments and is backing this commitment with a £1bn reserve pot. UK life and pensions chief executive Gary Withers says that despite the fund delivering positive returns for the second year running, the growth is not sufficient to compensate for the three-year bear market. The fund delivered an 11.5 per cent return in 2004. The FTSE remains around one-third below its December 1999 peak. Withers says: “We have seen a decline in with-profits business but this is a second year of strong returns from our with-profits fund and it remains a core plank of our product strategy.” NU has an array of with-profits funds and bonus rates. Bonus rates on implicit char-ged life and investment policies taken out after October 1998 also fell from 2.5 per cent to 2 per cent. Policies taken out before this date retain a 2.5 per cent bonus. Regular bonus rates on NU’s Provident Mutual poli-cies are now all zero and conventional policies all have bonuses in the 0-1 per cent bracket. Hargreaves Lansdown head of pension research Tom McPhail says this reflects overpayment of bonuses during the heady 1990s.