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Rates are halved as bonus season starts

Clerical Medical, Axa Equity & Law and Ecclesiastical Insurance have all slashed their annual with-profits bonuses by half to kick off the bonus declaration season.

Regular bonus rates on Axa Equity & Law have been cut from 2 per cent last year to 1 per cent for 2005.
Reversionary bonus rates on Clerical Medical, Ecclesiastical and Guardian Royal Exchange’s with-profits policies have also halved from 1 per cent last year to 0.5 per cent for 2005.

The bonus rate on Guardian Royal Exchange’s compound series with-profits offering has been cut from 1.95 per cent to 1 per cent.

Axa chief actuary Peter Shelley stresses that Axa Equity & Law business comprises just 50,000 out of Axa’s 1.6 million policies or around 3 per cent and the bonus declaration for Axa customers will be made in March.

Norwich Union has held its regular bonus rates for new unitised with-profits business at 4.25 per cent for life and investment policies, 4 per cent for pensions and 3.5 per cent on stakeholder pensions.

The widespread cuts come despite a 7.5 per cent gain in the FTSE over 2004.

Kohn Cougar partner Jason Evans says cuts of such size following a stockmarket rise will disappoint investors.
Evans says: “With-profits funds’ accounts are opaque and it is difficult to know what their shortfalls are and how much they want to increase their reserves.”

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