Norwich Union slashes with-profits bonus

Norwich Union is cutting final bonuses on its with-profits products by up to ten per cent after stock market falls.

The insurer said payouts on unitised policies will be reduced by about 7.5 per cent, while payouts on conventional business will fall by five per cent on average, but may be reduced by as much as ten per cent.

Aviva-owned Norwich Union said no changes are being made to regular bonus rates and market value reductions (MVRs) are not being introduced.

John Lister, chief actuary at Norwich Union, said: "We have reduced final bonus rates because equity markets, commercial property and corporate bonds have fallen significantly in value since the beginning of the year.

"We are taking responsible action to reflect the market movements over the past nine months. We need to ensure that those policyholders who leave the fund do not take more than their fair share at the expense of those customers who remain in the fund."

Norwich Union said its with-profit fund has performed "well" against average savings accounts and the FTSE All-Share over the short, medium and long term.

Mr Lister said the practice of 'smoothing' – holding back some of the profits in the good years to make up for a fall in earnings in the event of a downturn – has protected customers from stock market volatility.