Financial Firm Cuts Its Policy Bonuses

Bristol-based financial services company Clerical Medical hasannounced it is cutting bonuses on its withprofits policies.

The group, which also has a customer service centre in Clevedon,said regular bonuses on life policies would be reduced to three percent from four per cent, while pensions would be cut to 3.5 per centfrom 4.5 per cent.

Final bonuses have also been reduced, although the group said theamount varied according to the type of policy, how long it had beenheld for and how much was in it.

The move means someone who had paid GBP50 a month into a 25-yearendowment policy will see the maturity value of their policy fall bynearly 10 per cent to GBP68,142 from GBP75,595 before yesterday'sannouncement.

The final value of a pension into which someone had paid GBP100 amonth for 10 years will be GBP14,956 - down from GBP16,493.

Adrian Saunders, Clerical Medical Investment Group actuary, said:"The past three years have seen severe investment conditions and thereduction in bonus rates reflects this. However the spread ofinvestments in our with-profit fund means that policies have not beenfully exposed to stock market fluctuations.

"We have taken a prudent approach to the balance of what we payout on maturing policies and what we may pay in the future and weneed a sustained stock market recovery to maintain payouts at currentlevels.

"With-profits still has an important part to play in theinvestment mix of many of our customers and we remain committed tothis market." With-profits policies are designed to smooth out theups and downs of the stockmarket over the life of the policy, but thestock market has fallen so much in recent years that it is now havingan impact on many companies' policies, including Bristol employerRoyal & SunAlliance, which also cut rates this week.