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UK insurer bonus rates slashed

Friends Provident has today announced a 20% reduction in with-profits payments as the insurance sector continues to feel the pain of the economic downturn around the world. While this move is no surprise and reflects the general conditions of the market it could severely handicap many who depend upon their insurance investments for their long-term financial well-being.



As an example of the other factors used to calculate the final payout for with-profits policies, a 25 year policy that matures this year would be around 20% lower than in previous years although when you consider both final and annual bonus rates the reduction is significant. Just last year Friends Provident was paying a final bonus of £6293 to holders of a 25 year endowment but this year the figure will be just £704. Rather alarmingly, some advisers have addicted that final bonuses will soon disappear altogether.



Investment policies have become both an essential as well as a useful savings tool for many in the UK and the decimation of payouts will hit many people very hard. There is also the potential for investors to consider other investment opportunities and investment vehicles in the years ahead. Yet again, the insurance market could be another area of finance changed forever because of the current market turmoil.

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