Friends Prov slashes with-profit bonuses

Pile of gambling chips

Friends Provident has slashed final bonuses on its with-profit funds by as much as 22.5% after experiencing what it terms a “challenging year”.

The insurer has also slashed regular bonuses after the return on its with-profits fund fell by 10.5%.

Andy Carr, chief actuary at Friends Provident, says: “To ensure that we are fair to all customers, we have reviewed regular bonus rates to target an appropriate balance between the guaranteed portion and the total level of benefits.”

Market value reduction rates (MVRs) – the charge on people who leave the fund early - have also been increased to “reflect latest market conditions”.

Carr says: “MVRs have also been adjusted to ensure fairness between customers surrendering and those who remain invested in the fund. We needed to reduce bonus rates to reflect the fall in underlying investment values.”

Nigel Callaghan, annuity analyst at Hargreaves Lansdown, says: “This is one of the worst bonus announcements I have ever seen. The outlook for Friends Provident with-profit policyholders is poor.”

Callaghan says although the 10% fall in returns isn’t too bad, the fact that 16% of the fund is invested in real assets, such as equities and property, means it is not positioned to be able to ever recover.

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