Abbey National declared last week that there would be no annual bonuses for with profits policyholders, due to the continuously poor markets. Final payouts have also been cut by around 25%.
Policies affected by the announcement will be Scottish Mutual, Scottish Life and Abbey National Life.
In making the announcement, Abbey questioned the sustainability of bonus declarations made by other providers. But, in making the drastic cuts Abbey claimed that they were committed to their life businesses and have taken sustainable and prudent action.
Whilst everyone wants great returns from their investments, people invested in the stock market have not been granted their wishes. With profits policies are also based on the stock market but smooth the good and bad times. If there are more bad times than good you can end up with nothing to smooth.
In our view, at least Abbey have taken action which, if returns improve, should help them regain soundness for the future.
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