Scottish Widows cuts bonuses

13 April 2012

SCOTTISH Widows is cutting bonus rates on many of its long-term savings products for the fourth time in two years.

The group, which is part of Lloyds TSB, said it was reducing regular bonus rates on unitised with-profits policies by between 0.5% and 1%.

However, policyholders with conventional with-profits life policies fared slightly better with bonus rates being kept on hold, although the group added that it was not paying any regular bonuses on most of its conventional pension policies.

Final bonus rates paid on with-profits policies have also been reduced, it said.

Scottish Widows also announced it was increasing the regular bonuses it paid on its Flexible Options Bond Growth Fund from 4% to 5%, and on its Flexible Options Bond Income Fund from 3.75% to 4%.

The bonds were launched after the worst of the stock market falls occurred between 2000 and the middle of 2002.

Adrian Eastwood, actuarial director of Scottish Widows, said: 'Stock markets still have a long way to go before they get back to previous levels. As a result, further reductions in regular bonus rates are necessary for those types of policy that have experienced the effects of sustained falls in asset values.'

The impact of today's cuts mean that someone who had paid £50 a month into an endowment policy for 20 years will see the final value of their investment fall to £23,234, compared with £27,678 if it had matured in February 2003.

The final payout on a pensions policy into which someone had paid £200 for 20 years has fallen to £109,559, compared with £128,034 a year earlier.

Scottish Widows also announced today that it was reducing its market value reduction, the penalty people pay for cashing in their policy early, to an average of 10% of the policy's value from 16% at the end of 2002.

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