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NU with-profits bonuses cut by up to 19 per cent

Norwich Union has become the latest life office to slash annual bonus rates, hitting some with-profits policies with cuts of up to 19 per cent.

The news comes after Scottish Widows admitted that it was reducing bonuses on its savings policies by around one-third.

NU says it will cut bonuses on savings policies to 4.25 per cent from 5.25 per cent and on personal pension policies to 5.25 per cent from 6.25 per cent.

It blames the reductions, which will affect more than three million people with former General Accident, Commercial Union, CGU, Norwich Union or Provident Mutual policies, on poor investment returns following the 16 per cent fall in the FTSE 100 index last year.

It had projected a positive return on its with-profit funds of 7.25 per cent during 2001 but the return was -9.6 per cent. NU says investors should not be deterred from taking out with-profits policies despite the latest round of cuts.

Chief actuary Mike Urmston says: “The very poor performance of the stockmarkets has had a direct impact on the value of with-profit funds and this has to be reflected in bonus rates and payouts. However, we see no reason why with-profits should not continue to provide attractive returns to both new and existing policyholders.”

Roberts Clark director Jo Roberts says: “I am slightly surprised that NU did not make bigger cuts but I think it was a strategic decision.

“They probably wanted to ensure that investors do not walk away from them and that they look good against Scottish Widows. I am certain they want the number one spot in the tables.”

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