NU cuts final bonuses for with-profits policyholders
by Gill Montia
Norwich Union (NU) has announced that it is cutting final bonuses for with-profits policyholders whose policies are maturing this year.
The insurer, which is part of the Aviva group, says it is taking the action to protect the strength of its four with-profits funds amid falling equity markets, commercial property values and corporate bond yields.
The company’s core with-profits fund achieved a pre-tax return of -7.3% in the six months to the end of June, compared with a gain of 5.4% during the same period of 2007.
Around 2.4 million policyholders, the majority of whom are investors in NU’s NULAP and CGNU funds, will lose out by an average of £2,000 as final bonus rates are adjusted down by up to 10%.
The changes mean that a Norwich Union policyholder who has paid £50 a month into a mortgage endowment policy for 25 years will receive a final payout of £42,885.
This figure compares with a payout of £46,829 in January of 2007.