AXA recently announced they were to cut their with-profits terminal bonus rates. Regular bonuses will not be changed. The cuts apparently only apply to AXA Sun Life policies invested in the with profits fund in terms of both pensions and life business. They also apply to pension and conventional life products invested in the Sun Life Assurance Society with profits fund. According to AXA, terminal bonuses have been cut by around 4% for pensions but 6% for life business. This includes endowments and is likely to make matters worse for many worried policyholders. The Chief Financial Officer for AXA commented by saying, "With profits payouts are still high relative to actual investment performance". He also went on to say, "Like other providers, we are making these changes despite the recent stockmarket upturn".
Our View:
The cutting of terminal bonuses will come as a blow to people with policies maturing soon. These people could be forgiven for thinking bonuses should be on the up, if anything, especially with the gradual recovery of stock markets. However, what we cannot understand is why market value reductions have been decreased but terminal bonuses cut further. Why not leave terminal bonuses alone for policyholders that have remained loyal to AXA until maturity? People taking their money out mid-term now seem to be getting a better deal. AXA told us that many valuations that have been sent to clients show a greater value on paper than there actually is in the with profits fund. Probably by around 27% as this is the penalty.Our advice is to take advice. This is especially true if you have AXA group mortgage endowment policies maturing in the next few years.