UK - Clerical Medical has cut its annual and final bonus rates by 1%.
Annual bonus rates increase the guaranteed amounts on with-profits policies each year, even when the stock market is delivering negative returns.
As a result of the changes to final bonuses Clerical Medical said it was able to remove the market value adjuster, which was recently applied to a number of policies. John Edwards, chief executive said: The changes reflect prudent management of our with-profits fund and help to ensure that all policyholders receive a fair return. The reductions in final bonuses would have been greater but for the smoothing effect of the with-profits process.
There is continuing media attention on with-profits business. We firmly believe that it remains a sound long-term investment proposition and that investors can achieve good results that outperform many other savings and investment products.
“But with-profits is not immune to the wider economic environment which has also affected unit and investment trusts, and sees deposit rates at historically at low levels. Even so, our five year with-profits bond has delivered an annual return some 40% higher than the average UK equity unit trust.
With regard to issues of transparency it is important that policyholders have a clear view and understanding of how with-profits products work. Clerical Medical is playing a leading role by publishing its detailed guides, its underlying investment returns and its bonus policy.
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