Standard Life cut payouts and increases exit penalites on with profits
Hot on the heels of Legal & General’s bonus cuts, Standard Life announced a double whammy for their 2 million with profits customers. Final bonuses will be cut by up to 13 percent while exit penalties in the form of Market Value Reductions (MVR’s) will be increased.
Standard Life blames “significant falls in equity markets” and current market volatility for the cuts in bonuses which are likely to be between 9 and 13 percent for many customers. According to the company a 25-year, £50 per month endowment mortgage would pay £32,932 at maturity, down from £34,701 before the bonus cut. While mortgage endowment payouts could fall by 11 to 13 percent some pension customers will see final bonus cuts of between 8 and 14 percent. Standard Life’s Margaret Flaherty confirmed that “most with-profits customers will see a fall in the value of their plan.”
As if this wasn’t bad enough for beleaguered with profits customer, Standard Life also announced that more will be hit by exit penalties in the form of Market Value Reductions (MVR’s). These are intended to dissuade customers from leaving policies by imposing exit charges and will be both increased in amount and extended to cover more with-profits plans. Endowment mortgage customers could be hit with an exit penalty of up to 7 percent, although the average is likely to be around 1.6 percent.
Standard Life are the latest company to raise the use of MVR’s following Norwich Unions introduction of MVR’s last week. Marget Flaherty said they were being increased to “ensure that we maintain fairness between planholders who choose to leave with profits, and those who remain invested until their plan maturity or retirement date”.
For those wondering if the current financial turmoil is another nail in the coffin of with profits Standard Life said they remained committed to them and continue to “believe that with profits can be an appropriate investment as part of a balanced portfolio”.
