Aviva has increased some of its with-profits final bonus rates, although hundreds of thousands of customers will see their regular bonus rates frozen or cut this year.
The insurer says that despite the volatility of investment markets over the past two years, its with-profits funds continue to offer its 2.1 million investors “consistent and stable returns”.
However, regular bonus rates for conventional with-profits policies, including endowments, have all been frozen while ex-CGNU policies have had final bonus rates cut by 0.5% to take into account the long-term performance of the fund.
Final bonus rates for unitised life and pension policies have been increased slightly and some exit fees – also known as market value reductions - have also reduced. For conventional life and pensions, including endowments, some final bonus rates have reduced while others have increased.
David Barral, chief operating officer at Aviva, says: “The vast majority of customers who have invested in the Aviva with-profit funds have received higher returns than if they had invested in an average bank or building society account, and have been protected against the full impact of volatile investment markets.”
Laith Khalaf, pensions analyst at Hargreaves Lansdown, says: “In a year when the sun was shining on the UK stockmarket. Aviva has failed to make much hay for its with-profits investors. The good news is that market value reductions are coming down, so those who wish to leave the fund can often do so at little cost.”
Aviva has also revealed a sharp fall in the maturity values of its mortgage endowments. Endowment customers investing £50 a month in the ex-NULAP fund over the last 25 years will this year receive an endowment payment of £27,884, down from £43,775 last year.
Barral admits that many endowments are not on track to meet the original target amount. But he adds: “We believe most customers have already taken action to cover any shortfall. Customers should be reassured that, in addition to the life cover provided over the period, their investment has performed better than an average savings account.”
More than 90% of Aviva mortgage endowment customers are on shortfall alert, meaning they may not hit target when they mature.
Last year, Aviva approved cash payments of up to £1,230 to around one million of its with-profits customers. Payments, which came from the inherited estate or financial buffer built up over time, have already been paid to over 90% of customers with the remaining 10% expected to be distributed in the first few months of the year. In total, £450 million will be sent to customers.