L&G cuts final bonuses by up to 9%

by Gill Montia

Story link: L&G cuts final bonuses by up to 9%

Legal & General (L&G) has announced that it is cutting final bonuses on its with-profits policies, by between 5% and 9%.

The insurer says it is responding to turbulent markets and its with-profits managing director, Mark Gregory, is predicting that the change will affect around 10,000 of the company’s 800,000 policyholders.

According to Mr Gregory, the move is aimed at ensuring fairness for all customers, whether or not their policies are about to mature, as it will even out payments through good and bad financial times.

Compared to the beginning of the year, investment returns on the assets that back L&G’s life with-profits policies are down by around 14%.

The changes will apply to with-profits pensions and endowments: a 25 year, £50 a month endowment mortgage will pay out £38,565 today rather than a pre-cut £41,293; a £200 a month pension maturing now will be worth £90,999 compared to £98,511.

In related news, Norwich Union announced earlier this week that it would be applying exit penalties to customers cashing in with-profits policies.

The insurer said it was protecting all its policyholders from falling investment returns, by introducing market value reductions.