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Friends Provident holds bonus rates after good year for with-profits

Friends Provident has frozen the bonus rate for around 1.8 million with profits policyholders after its main with-profits funds grew more than 10% last year. However, over 90% of mortgage endowments are not on track to repay home loans.


Friends Provident has frozen the bonus rate for around 1.8 million with profits policyholders after its main with-profits funds grew more than 10% last year.

However, only 3% of Friends Provident endowment policyholders have experienced enough investment growth over the years to repay mortgages to which they were originally linked. The company has warned 93% of endowment holders they will need to save more if they still aim to repay the home loan when the policies mature.

The £8.3 billion Friends Provident with-profits fund produced a return of 13% last year as its managers increased their overall holdings in shares and property to 49%. Regular bonus rates were frozen for most policyholderss with increases for unitised pensions and overseas policyholders.

The surrender value of a Friends Provident unitised bond taken out in January 2001 with a single premium of £10,000 would now be worth £14,137 which is 14.7% higher than its £12,330 value in 2010.

A man who invested £200 per month in a Friends Provident unitised personal pension plan since January 1991 would have a pension pot of £77,371. It would have grown by 9.9% over the last year from £68,088. The value of the contributions alone would have been worth £48,000.

‘2010 saw further improvements in investment market conditions relative to the lows of 2008/9, with positive returns from all major asset classes resulting in increased payouts for the majority of with-profits policyholders,’ said Andy Carr, chief actuary for Friends Provident Group.

Friends Provident, which is owned by insurance consolidator Resolution, acquired the £11.4 billion AXA Sun Life and Sun Life Assurance Society with-profits funds and the 845,000 policy holders invested in them last year. The AXA Sun Life fund produced a return of 13% and the Sun Life Assurance fund generated 11% over 2010 but bonus rates have remained at the current levels.

Around 11% of AXA with-profits policy holders’ investments are on track while 71% have been warned they will need to set aside more to make up the shortfall between their policy's performance and its projection.

A £10,000 single premium investment in an AXA Sun Life unitised bond in January 2001 would now be worth £12,221 an 8.4% rise from the £11,270 it was worth in 2010. Cashing in this bond would trigger a 5% market value reduction, which has been applied to AXA Sun Life with-profits bonds since October 2008.

2 comments so far. Why not have your say?

Charles Glenn

Feb 06, 2011 at 22:54

When might someone sold this product in '06 expect to recoup some of the massive losses incurred since then? Not much safer than equitites as far as experince goes.

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Tim Matthias

Mar 24, 2011 at 11:02

"Bonus rates have remained at current levels" is not a particularly useful statement if you don't say what those levels are.

I am fed up with the lack of simple online bonus information provided by the majority of life companies.

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