Wesleyan slashes bonuses

LIFE insurer Wesleyan has announced that payouts on its with-profits pensions policies will be cut by up to 15%.

Falling stock markets have forced the mutual, which has 130,000 meembers, to pass on the pain to policyholders.

On life policies, most payouts are being reduced by between 3% and 6%, compared with a year ago. On pension policies, the falls are mostly between 6% and 15%. This reduction has been phased, with falls of up to 6% applying from January 2004.

A 20-year personal pension plan for a man paying £200 a month, retiring at age 65, will now pay out £156,368 instead of £171,263.

The insurer stressed that maturing policies are still providing 'competitive returns' after inflation, with a 25-year endowment returning 11% a year after tax, a real annual return of 7.3%.

Strong investment performance on the with-profit fund, which returned 17% last year, was put down to a commitment to shares. The turbulence of the stock market in 2000, 2001 and 2002 forced many life companies to shift money into safer assets such as bonds or property.

'Wesleyan has had a major commitment to equities for many years,' said Frank Brooks, managing director. 'Most of our competitors reduced their investment in equities during the bear market and we now have a significantly above-industry average level of equities in our with profits fund.