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.
News sponsored by:
After Boris announced he was backing Brexit, sterling suffered its biggest slump in six years. Our Market Mavens discuss. Follow the Market Mavens LinkedIn page for weekly videos, in which our panel of industry experts share their views on financial news
The Citywire guide to investment trusts
In association with Aberdeen Asset Management
More about this:
Tools from Citywire Money
From the Forums
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add email@example.com to your safe senders list so we don't get junked.