Standard Life payouts hit by crunch
Standard Life with profits policyholders took a hit when it was revealed that there will be cuts of up to 8 percent on payouts due to challenging conditions created by the credit crunch. 35,000 mortgage endowment customers with policies maturing this year will experience a shortfall as payouts will not be enough to repay their mortgage.
The payout cut is shown by a sample 25 year, £50 a month mortgage endowment which pays out £34,701, down 8.2 percent from the £37,763 paid earlier this year.
Standard Life report that difficult market conditions have “resulted in significant falls in value for most types of assets” but that “smoothing” (to even out fluctuations in returns between funds) has cushioned the effect of downward market trends. Their investment strategy for mortgage endowments is shown as allocating the following: 2.4 percent cash, 18.1 percent property, 37.1 percent equities and 42.4 percent to fixed interest.
Many with-profits plans will include an enhancement due to distributions from the inherited estate. Plans eligible for enhancements are those which began investing before demutualisation and and have remained in with-profits since then.
There is no market value adjustment, or Unit Price Adjustment (UPA), on Homeplan mortgage endowments. Standard Life also announced that annual bonus rates are maintained for all with-profits plans.
