Standard Life drops Bonuses

Standard Life has announced the thousands of policyholders will see their annual bonuses cut or frozen. It has claimed that the reason for this is to maintain the guarantees on their with profit policies.

The bonus announcement confirmed that most polices increased in value since last year, but action had to be taken to ensure that future guarantees could be met.

Standard Life has more than one million customers that invest into various with profits policies. Unitised pension plan holders will see their regular bonus rate drop from 2% to 1.5%. Bonus rates on other unitised life policies dropped from 1.5% to 1.25%. Bonus rates for with profits bond holders were held at 2.5 per cent.

A positive point however was that Market Value Reductions (MVRs) had been lowered for many policyholders.

“In the long run we expect asset classes such as equities and property to offer better prospects for with-profits payouts,” said Margaret Flaherty, Standard Life’s with-profits communications manager.

“To allow us to keep an appropriate level of flexibility in the amounts we can invest in these asset classes, we’ve decided to change some bonus growth rates from today.”

However Standard Life confirmed that to meet higher guarantees in the future it might need to invest in less volatile investments, for example fixed interest and cash’. “

This might reduce the amounts we could eventually pay out as final bonus,” it said.

Within the bonus announcement Standard Life advised policyholders that regular bonuses needed to grow at a lower rate so that the company could invest into assets with growth potential such as equities as they have a potential for longer term growth.