Norwich Union endowment shortfalls grow as bonus cuts announced
Norwich Union endowment policyholders have been hit by bonus cuts again. Other with profits customers are also affected. NU believes it’s mortgage endowment promise to customers facing a shortfall is still viable.
In the latest announcement, regular bonus rates remain unchanged on conventional policies although they have been cut by 0.75 percent on unitised policies. Final bonus rates have been cut on all with profits funds, with with some being cut by 15 per cent over 2008 levels. The cuts have been made to to bring payouts back in line with asset share subject to smoothing. Unfortunately for endowment policyholders the effect is anything but smooth as for many the result is a bigger mortgage endowment shortfall. Norwich Union say the fall in value of the funds is because “unprecedented market conditions over the past year have affected short-term performance.”
For some endowment mortgage holders payouts could be over 11 per cent less than a similar policy maturing last year. An example being a 25 years £50 per month endowment paying out £34,775 on maturity this year, £1,254 below the target figure of £36,029. David Barral, director at Norwich Union, said: “Our with-profits funds have continued to prove their worth by delivering attractive long-term returns for investors while protecting them from the ups and downs of the stock market.”
The following examples were provided in the Norwich Union announcement. They are based on a male, non-smoker, aged 29 investing £50 a month for 25 years starting on 1 January 1984.
| Value at 01/01/08
(24 years) |
Maturity value 01/01/09 | Target amount | Excess over target | Increase % (Excl. premiums paid) | |
|---|---|---|---|---|---|
| CGNU (Incl. GA) | £40,349 (£38,761) | £42,322 (£39,299) | £35,652 | £6,670 (£3,647) | 3.4% (-0.2%) |
| CULAC | £34,763 (£33,543) | £35,307 (£32,924) | £37,121 | -£1,814 (£-4,197) | -0.2%
(- 3.6%) |
| NULAP | £36,207 (£36,207) | £34,775 (£34,775) | £36,029 | -£1,254 (-£1,254) | -5.6% (-5.6%) |
Figures in brackets exclude Special Bonus.
| Value at 01/01/08
(24 years) |
Maturity value 01/01/09 | Increase % (Excl. premiums paid) | |
|---|---|---|---|
| CGNU (Incl. GA) | £41,347 (£39,719) | £43,368
(£40,271) |
3.4% (-0.1%) |
| CULAC | £37,535 (£36,218) | £38,123
(£35,549) |
0% (-3.5%) |
| NULAP | £37,522 (£37,522) | £36,038
(£36,038) |
-5.6% (-5.6%) |
| PM* | £30,696 (£30,696) | £30,696
(£30,696) |
-2.0% (-2.0%) |
*investments not switched to CGNU mid-2005.
Further information is available from Norwich Union / Aviva
