View more on these topics

Reversionary cuts seen as end of bonus war

Life offices have stunned IFAs by slashing with-profits reversionary bonus rates despite last year&#39s rocketing stockmarket.

The fall is said by life companies to have been brought about by the continuing trend towards lower inflation, lower interest rates and the approach of Emu.

Life offices are also pointing the finger at the Government&#39s decision in last July&#39s Budget to axe tax credits on dividends.

But last year saw a 24 per cent rise in the UK stockmarket and some analysts, including traded endowment mar- ket-makers, believe there is a more sinister reason for the sudden reduction in bonus rates. They claim this marks the end of a 15-year battle for business in the with-profits market. It is alleged that, during that period, bonuses were artificially inflated by life offices to boost business.

Despite the cuts, payouts for 10- and 25-year endowments have increased in some cases by up to 7.6 per cent.

Tep market-maker Beale Dobie believes the drop in reversionary bonus rates shows that life offices are falling back in line with the underlying value of assets.

Joint chief executive David Beale says: "We believed that some companies had overpaid in the late 1980s and early 1990s. In all cases, we expected little or no change in reversionary bonus rates, which we believe are at sustainable levels in relation to current investment conditions."

Scottish Provident is one of the few life offices which has declared that it will maintain reversionary bonuses for life policies.

Scottish Life, General Accident Life, Norwich Union, Friends Provident and Scottish Provident have all slashed with-profits reversionary bonus rates on pension policies.

Scottish Life has cut its reversionary bonus on basic pension benefits for regular-premium contracts to 2 per cent from 2.25 per cent. It has maintained its bonus on declared bonuses at 4.5 per cent.

Friends Provident has cut its life policy reversionary bonus to 2.75 per cent from 3 per cent on the sum assured. Accumulated bonuses fall to 4 per cent from 4.5 per cent.


Harman praises IFAA on review proposals

The Government has praised the IFA Association&#39s proposals to the Department of Social Security&#39s pension review. Speaking last week at the City Forum conference on stakeholder pensions, secretary of state for social security Harriet Harman singled out the IFAA&#39s understanding of stakeholder pensions.

Templeton investors give Oeics go-ahead

Parts of Eagle Star could be sold of as part of a major strategic review by BAT. But BAT chief executive Martin Broughton plays down suggestions that BAT will sell off Eagle Star entirely. BAT is to merge its financial services arm BAFS with Zurich Group later this year. BAT has already been forced to […]

Scottish Mutual has restored faith

As an alternative to the general carping and complaints directed at the insurance industry, may I, by way of a change, congratulate and compliment Scottish Mutual for a recent experience which underlines what I was taught when I first started in sales 40 years ago, which is that justified complaints should be welcomed as they […]

DMG operating officer quits as CFO is appointed

Deutsche Morgan Grenfell worldwide chief operating officer Jonathan Asquith resigned suddenly last week. According to DMG, the appointment of Gerry Sherer as chief financial officer in August reduced the need for a chief operating officer. Sherer reports directly to the bank&#39s Frankfurt headquarters, bypassing Asquith. Asquith was offered a position as regional manager for the […]

FAMR – a familiar response

Pension specialist Fiona Tait takes a look at the Financial Advice Market Review and assesses the three areas where it suggests improvements can be made With significant budget changes ruled out (for a while anyway), the pension community briefly turned its attention to the FCA’s final report on its Financial Advice Market Review (FAMR), hoping […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and thought leadership.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm