Royal London takes axe to bonuses

ROYAL London, the country's second-largest mutual life insurer, is slashing annual bonuses by more than a quarter on some of its long-term savings plans.

The group, blaming two years of poor stock market returns, has cut annual bonuses on its 10-year with-profits policies by 26% and by 17% on its 25-year ones. It cut terminal bonuses by 37% on 10-year investments and by 21% on 25-year ones.

'The bonuses we have declared reflect a recent period of lower investment returns,' said chief executive Mike Yardley. 'Our competitors remain subject to the same investment conditions. Royal London continues to offer our with-profits policyholders a very competitive return on their savings.'

It cut annual bonuses on 10-year with-profits policies to 2.9% from 3.9% in 2000, while terminal ones are 36.5% down from 54.8%. On 25-year policies annual bonuses are reduced to 5% from 6% last year, while terminal bonuses will be 455.2% compared to 576.3% in 2000.

Royal London said this meant the value of 10-year policies would now be 10% less than if they had matured 12 months ago, while 25-year policies would be down 15%.

Scottish Life, a division of Royal London, also announced reductions in its annual bonuses for with-profits policies taken out before July 1 2001.

Annual bonuses on its annual premium compound bonus life fund policies have been reduced to 1.5% of the sum assured from 1.75% in 2000, with the bonus paid on sums accumulated from previous bonuses set at 2.25% down from 2.75%. Terminal bonuses on maturing life policies will be paid at the same rates announced in October when the group reduced them due to market conditions. The final bonus on a 10-year policy maturing this year will be 21%, from 37.5% the previous year.