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Scottish Life cuts WP payouts by up to 26%

Scottish Life is slashing its with-profits bonus rates on life policies by up to 26 per cent, with final pension payouts also coming under the knife to the tune of up to 16 per cent.

Scottish Life says the revisions, effective from April 14, are a continuation of the process of smoothing down payouts, reflecting the significant drop in worldwide stockmarkets over the past two to three years.

A 25-year £50 a month endowment will now pay £62,347 compared with £84,259 last year, representing a drop of 26 per cent.

A 20-year individual pension for a male retiring at 65 with a premium of £200 a month will now pay out £178,933 compared with £214,270 last year, a drop of 16 per cent.

Chartwell chief executive Craig Wetton says policyholders will be “mortified, almost inconsolable” by the cuts.

Scottish Life chief executive Brian Duffin says: “Although there have been several reductions in bonus rates over recent years, actual payouts after the current reduction continue to be higher than &#39asset shares&#39, reflecting the smoothing pro-cess which is implicit in with-profits.”

Wetton says: “People in the final five years of their policy have suddenly seen their plans not slightly knocked off line but derailed.

“If you are suddenly faced with drops in term-inal bonuses, a life office needs to look long and hard at how its terminal bonus policy has been working over the last five years.”

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