Standard Life cuts payouts

Investors with Standard Life, Europe's largest life insurance company, will see the payouts on their pensions and investments fall for the fourth time in under two years, the company announced today.

Standard Life said that maturity and retirement payouts on with-profits policies would fall by an average 6% although annual bonus rates will remain unchanged.

Today's move will reduce the maturity value of a 25-year savings policy into which ?50 a month has been paid from its level of ?75,984 before the cut was announced, to ?69,386 if it matured today.

"Significant changes in the investment environment - in particular the combined impact of low inflation and falling interest rates - have resulted in lower returns on all forms of long-term investment, both equity and non-equity related," Standard Life said in its report.

The mutual, which has faced attempts by disgruntled investors to demutualise earlier this year, is the latest in a long line of life insurers to cut payouts on with-profits policies.

Insurers first began reducing payouts just under two years ago; since then Prudential, Norwich Union and Scottish Widows have all reduced them three times in just over a year.

Standard Life added that maturity values for almost all mortgage endowment policies had improved since the beginning of the year and that, as a result, policies with a projected shortfall had decreased, as has the extent of any projected shortfalls.

The insurer announced the cuts at the same time as saying that it would be implementing 200 job losses.

The news of Standard Life's cut was followed swiftly by an announcement from mutual insurer Liverpool Victoria, which is also to cut maturity payouts for its with-profits policies. The insurer blamed continued poor investment conditions for the decision.

Liverpool Victoria said the reductions would be between 3% and 5% compared with payouts as of January 1 and would take effect from August 11. The cuts will apply to conventional with-profits payments only - regular bonuses on policies are unaffected and the mutual's unconditional mortgage endowment guarantee remains unchanged.