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Standard slices payouts 10% as surrenders rise

IFAs say Standard Life has bowed to the inevitable by imposing a 10 per cent market value adjuster and slashing payouts by 10 per cent on Monday.

Standard has made the with-profits cuts in an interim bonus declaration. It blames the move on stockmarket falls and rising surrenders.

It follows increasing media and industry speculation about the line the company was taking. Before Monday&#39s announcement, it was the only major life company which was not imposing an MVA, and anecdotal evidence that some IFAs were recommending clients cash in on the high surrender values.

The bonus cuts will affect Standard&#39s mortgage endowment promise, and like rival Norwich Union, the company says it does not expect to meet all future shortfalls in full.

Following the bonus cut, 12 per cent of Standard&#39s with-profits endowment maturing next year face a shortfall, and another 4.5 per cent are in danger of a shortfall.

Advisers and rivals say Standard could have avoided a lot of speculation on its financial strength if it had acted sooner but Standard has hit back, claiming the move was dictated by market conditions rather than its financial position, which it says remains strong and secure.

This is the first-ever interim bonus declaration by Europe&#39s biggest mutual but it has imposed MVAs in the past, although not since the late 1980s.

Standard Life head of with-profits communications David Hare says: “There have been some spikes in withdrawals and it is better to be prepared than sorry. We are still smoothing up but prefer not to say by how much. We cannot guarantee that we will pay the mortgage endowment promise in full in the future.”

Dennehy Weller managing director Brian Dennehy says: “It is good news and long overdue. Standard&#39s communication over recent months has not been good and they seem to have learnt some lessons. Standard had the financial strength to hold out but when IFAs encourage clients to surrender overvalued policies they had no choice.”

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