View the article online at http://citywire.co.uk/money/article/a467128
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.
The Citywire guide to investment trusts
In association with Aberdeen Asset Management
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by Chris Marshall on Mar 13, 2014 at 10:14