More bad news was heaped on beleaguered investors today when the UK’s largest life insurer announced it was cutting the bonuses on its long-term savings policies.
Norwich Union, which is part of insurance giant Aviva, said it was reducing the final bonus paid on its with-profits policies by around 5% from August 1.
The policies, which aim to smooth out stock market volatility during the course of the investment, are taken out as mortgage endowments, private pensions and long-term investments.
Norwich Union is reducing the regular bonus rates on its unitised with-profits policies by 0.5% to 3.75% for life business, 4.25% for stakeholders and 4.75% for other pensions.
It is also considering similar reductions for conventional with-profits business.
The group blamed the move on continuing stock market volatility, with the FTSE 100 Index falling by 25% so far this year, following drops of 16% in 2001 and 10% in 2000.
It said this had led to the value of its with-profits fund falling by 8.3% so far this year, though it added that someone with a 25-year mortgage endowment policy would still have had an average return of 11.1% a year.
But the move is further bad news for people who have endowment policies with the group, more than half of whom are expected to face a shortfall between the value of their policy and their mortgage debt.