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WP bonds plunge from 60% share to 10% in two years

With-profits bonds now account for less than 10 per cent of the single-premium life market as their popularity with IFAs and their clients continues to plummet, according to ABI figures.

The figures, available only to ABI members but seen by Money Marketing, reveal that with-profits&#39 market share slumped to 9 per cent in the first quarter of the year, down from 25 per cent at the same point in 2003. Less than two years ago, with-profits accounted for 60 per cent of the total market.

The ABI figures are in stark contrast to a Datamon-itor report released last week which predicted that sales would climb by 15 per cent annually by 2008. The report, which forecast sales rising to £560m from £277m, said the future of with-profits was in the hands of IFAs, who, it bel-ieved, were regaining confidence in with-profits.

But the ABI figures show that unit-linked bonds now dominate bond sales, having secured almost the same market share of 59 per cent enjoyed by with-profits before sales began their slide in 2002. Unlike Datamonitor, many experts believe this shift will be permanent although some providers argue that, even if this is the case, only the smaller firms on the periphery of the market will be hit.

Prudential UK savings & investments director Hugh McKee says: “I do not believe this marks the end of the line for with-profits. What we are seeing is a concentration of sales through a smaller number of providers who can provide the financial strength that consumers are looking for.”

Friends Provident marketing director Ian Jefferies says: “We have come to terms with the fact that with-profits volumes are diminishing rapidly and we are working hard to develop other products.”

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