Axa slashes final bonuses

INSURER Axa has cut final bonus rates by an average 5% on endowments and pensions for savers with the former Sun Life and Equity & Law.

The French-owned company, which has a total of 1.5m UK customers, blamed lacklustre stock markets for the cut, which follows an earlier reduction in March.

A £50 a month mortgage endowment maturing now will pay out £46,689, down from £49,323.

The group blamed three years of falling stock markets for its decision to cut bonuses.

But it added that regular bonuses on all its products remained unchanged, and terminal bonuses had been cut on only about 16,000 of its 1.5m with-profits policies.

With-profits policies are long-term savings products which aim to smooth out stock market volatility by holding back returns in good years and paying them out in bad ones.

However, the policies, which are often taken out as a pension or endowment to pay off a mortgage, have been hit by three years of falling markets, leading many insurers to slash the bonuses they pay on them.

Peter Shelley, chief actuary at Axa, said: 'The stock market recovery has been modest relative to the severity of the falls experienced between 2000 and 2003.

'As a result this change to terminal bonuses is needed to ensure that our with-profits payouts remain fair to all policyholders and properly reflect investment conditions over the last few years.'