With the World stock markets in their current state, the industry regulator, the Financial Services Authority has told insurance companies to “exercise prudence when setting bonus rates” this year.
Even though the FSA made the same statement last year, this years repeat might get taken more notice of, after another year of poor investment performance. The FSA is also telling companies not to make larger pay-outs just to give the public more confidence in their investments. This is known as offering ‘headline rates’ and is aimed at getting new money into the company. The only problem is that once the headline rate ends the new rates could be significantly lower than other providers on the market. However, if at that point you consider moving, there may be penalties for doing so.
John Tiner is Managing Director of the Financial Services Authority. Part of his statement on the subject of bonus rates said: “It has been a difficult time for life assurance funds and boards will need to exercise prudence in setting bonus rates, while at the same time being fair to policyholders in the smoothing of returns”.
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