Standard joins bonus reduction club
Standard Life has followed hot on the heels of Legal & General and reduced its with profits final bonuses due to significant falls in the equity markets in the last three months.
The Edinburgh-based asset management group said the current volatility in the markets was also a contributing factor to its decision to extend its exit charges - market value redemptions - to more of its with profits plans.
The changes mean many customers will see the value of their plans fall.
Margaret Flaherty, with profits communications manager for Standard Life Assurance, said: "Investment returns have generally been poor in the last year, but particularly so since August, resulting in the decision to reduce final bonuses and extend MVRs.
"The changes that we have made today will ensure we maintain fairness between planholders who choose to leave with profits, and those who remain invested until their plan maturity or retirement date.
"As a result, most with profits customers will see a fall in the value of their plan. Despite today's changes, with profits plans are still providing some protection against market volatility for customers approaching maturity and retirement.
"Standard Life remains committed to with profits and continues to believe that with profits can be an appropriate investment as part of a balanced portfolio."
Standard Life said the changes meant a payment on a 20-year savings endowment plan taken out on 29 October 1988 by a man aged 29 for £50 a month would have grown in value from £19,764 on 1 November 2007 to a maturity value today of £20,693.
However, a with profits bond based on an investment of £10,000 on 29 October 2003 would have reduced in value from £13,947 on 29 October 2007 to a cash-in value today of £12,060.
Cath Hearnden, director of Surrey-based IFA Hearnden Associates, said: "It is built into the contract that this can happen. The final bonuses are never guaranteed and market value adjustments are likely to happen in markets like this.
"While it is not nice, Standard Life is not doing anything that could not be justified in this market.
"Companies have not applied market value for years and years before the market starting falling in 2000 and now they seem very quick to apply them. Now that everyone has got used to it in 2000 that it can happen these companies have been quick to apply these changes."
The news follows the decision last month by Friends Provident and Norwich Union to reintroduce exit charges on their with profits policies.
