Scottish Widows pensions bonanza

SCOTTISH Widows is changing its pensions benefit policy so that final or 'terminal' bonuses for many of its 174,000 guaranteed annuity rate policyholders will increase by up to 30%.

The cost of boosting these pensions will be paid from the Additional Account fund - currently worth £1.7bn - which was established when Scottish Widows demutualised in March 2000.

The move follows the landmark House of Lords ruling made against Equitable Life in July 2000 which ordered the insurer to meet special pension guarantees known as Guaranteed Annuity Rates (GARs). This means that when interest rates are low, as they are now, most policyholders with guaranteed annuity rates should be able to receive significantly higher pensions.

Scottish Widows says the change in practice will be backdated to 1 January, 1999 and individuals who have made retirement claims since this date will be reviewed to identify whether they are eligible for higher benefits.

Scottish Widows will be writing to all affected policyholders over the next five months, starting with those most immediately affected. It says that policyholders should take no further action at the moment and wait to be contacted.

Mike Ross, chief executive of Scottish Widows, says: 'We have always held strong reserves against changing circumstances and the setting up of the Additional Account at the time of demutualisation has enabled us to take this action while maintaining the principle of fairness for all policyholders.'

If policyholders want to find out more, they should consult their financial adviser or call Scottish Widows directly on its dedicated helpline on 0845 607 8909. The line is open Mon-Fri, 8am-8pm and on Saturdays between 9am and 12.30pm.