LIFE insurer Friends Provident has taken the knife to bonus rates for with-profits policyholders affecting up to one million savers and bringing more misery to thousands of homeowners.
Payouts on maturing with-profits policies will reduce on average by 3% compared with February this year, the insurer's fourth cut in 18 months. From today there is a quarter-point drop in regular annual bonus rates and final bonuses for unified with-profits policies, and the same fall in final bonus rates on conventional with-profits policies.
Hardest hit are around 470,000 home owners with a Friends Provident with-profits endowment mortgages, whose policy values fall 5.75% from six months ago.
The payout on a £50-a-month 25-year endowment is now £48,334, down from £51,283 six months ago. That policy would have paid out £61,749 in February 2003.
Ben Gunn, managing director of Friends' life and pensions business, said: 'The changes announced today to bonus rates will ensure that there will be a closer alignment of policy payouts with their underlying investment values.'