Friends Prov reduces with profits final bonuses

  • Story by: Gemma Westacott
  • Magazine: FTAdviser
  • Published Friday , July 18, 2008

Friends Provident has reduced most of its with profits final bonus rates following fund underperformance.

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Gross investment return on the With Profits Fund were -7.25 per cent for the first six months of 2008. The fund needed to return 8 per cent for bonus payouts to match January levels.

However, Friends, which has 1.3 million with profits policyholders, said there would not be any change to regular bonus rates.

The firm said the fund's performance had been impacted by recent falls in investment markets, including the FTSE All Share Index dropping 13 per cent in the six months to 30 June.

Chief actuary Brian Harrison said: "Bonus rates announced in January of this year reflected investment returns over the whole term of the contract.

"To maintain payouts at January levels we needed annualised returns of around 8 per cent on longer-term policies. However the estimated return on the fund over the first six months is -7.25per cent.

"Accordingly, to ensure that we are fair to all customers - not just those with current maturing policies - we need to reduce bonus rates now to reflect the fall in underlying investment values."

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