In the bombardment of news that providers are slashing bonuses and returns on with profits policies, Standard Life is the latest to follow suit.
They have reduced payouts by up to 15%. They have also stated that they will continue to operate the smoothing effect on plans but only at maturity or retirement.
What is smoothing? In simple terms, some years you get good returns and in others you get poor returns. Rather than being on the roller coaster ride of markets when they go up or down, with profits funds aim to smooth the ride out by giving you a positive return (or no fall in value) when markets are poor because they have saved some of the profits from the good years.
Standard life are right to reduce bonuses to reflect the appalling returns of late, however we are not a believer in removing the smoothing element and only offering this at maturity. If you do that what is the difference between a lifestyle or managed fund and a with profits fund? None really.
Other with profits stories.