Standard Life slashes bonuses

By NICK GOODWAY FOR MAILONLINE
Updated:

 

STANDARD LIFE today took the axe to bonuses for savers and pensioners due to collect on their policies over the coming months.

The Scottish life insurer, which plans to float in two years' time, warned that further cuts for its 2.4m policyholders are likely.

The group said it will not cut annual bonuses, but final bonuses - which are added on the maturity of with-profits savings policies and on retirement for pensions - will be cut by an average of 8%.

A company spokesman claimed this would affect only 50,000 policies which are due to mature between now and the next bonus declaration in February. But unless bonus rates are shifted sharply upwards then, it will eventually hit all 2.4m Standard Life policyholders.

Today's cut means that someone with a £50 a month, 25-year policy maturing in the next few months who had been expecting to receive £62,603 will instead get only £56,873.

A Standard Life pension charging £200 a month for 20 years would have paid out £138,826, but will now only produce £125,826.

Other firms have reduced their bonuses but most by less than Standard Life and many not at all. Scottish Widows cut earlier this month and Axa back in March. The last time Standard Life cut was in February 2003 when it slashed terminal bonuses by an average 15%.

Today it said: 'Returns on many types of investment - cash, equities and bonds - have fallen in recent years and are expected to remain low due to low inflation levels.

'This obviously has an adverse impact on how much customers can expect their policies to be worth at maturity or retirement.

'The trend towards lower with-profits payouts is likely to continue especially for longer-term policies, even if the equity markets continue to recover.'

A spokesman denied that today's bonus cuts had anything to do with Standard Life's forced sale of £7.5bn worth of equities earlier this year to meet the Financial Services Authority's tough new guidelines on insurers' balance sheets.

But at the start of this month it revealed total sales fell 13% to £431m, while its life and pensions annual premium equivalent were 15% down over the last six months.

Worst hit were sales of individual pensions, which fell 22%, and with-profits bonds, which were 23% down.

Standard Life said it estimated that the return on assets linked to with-profits funds had been just 2.4% in the six months to end-June.

Most watched Money videos