Scottish Widows has stuck to its promise made earlier this year to cut with profits bonus rates if the markets did not rise sharply. The cuts have been made generally across the board.
However, there is good news for Flexible Options Bondholders and penalties for cashing in have been reduced. Annual or regular bonuses on unitised life and pension with profits policies have been cut by 0.5%. Also, holders of the Flexible Options Bond Income Fund have had their bonuses cut by 1% to 3.75%. Growth Fund holders of the same bond will see an increase of 1% from 3% to 4%.
Scottish Widows have reduced their Market Value Reduction penalty for cashing in across the board for unitised with profits policies. Life and investment policy MVR's have reduced from anything upto 27% to anything upto 23%. In terms of pension MVR's, penalties have been reduced from anything up to 28% to anything upto 25%.
Mike Ross, Chief Executive for Scottish Widows said: "Although we have seen some modest recovery in stock markets in recent months, current investment returns are still significantly below those earned a few years ago".
Our View
Scottish Widows have been very open with their policyholders and have not falsely lead them to believe bonuses were on the up.
It is disappointing that rates have had to be cut again but it is better for policyholders to see at least some return each year, rather than none at all.
The lower penalties in the form of Market Value Reductions are obviously welcome to policyholders. It does also indicate that the assets in the Scottish Widows with profits funds have recovered at least some of their value, thereby increasing each policyholders notional share of those assets.
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