Pearl 'to axe with-profits bonus'

WITH-profits investors with AMP Pearl should brace themselves for bad news. According to rumours inside the company, the life assurer will not pay out an annual bonus on its pensions and life policies this year, following poor stock market performance in 2002.

The source also claimed Pearl will slash terminal bonuses from 125% to 76%.

AMP, which took over Pearl‘s life business in 1998, refused to comment ahead of the official announcement of annual and terminal bonus rates in the next two weeks.

On Tuesday, rival insurer Britannic revealed it will not pay an annual bonus to investors this year.

Ned Cazalet, life insurance industry analyst at London-based Cazalet Financial Consulting, says he would not be surprised if AMP Pearl followed Britannic.

'I suspect we may well see other life offices not declaring an annual bonus, or at best cutting the rate,' he says. 'You only have to look at the market performance for last year – the market fell 23% - to see why. The life offices have taken a battering and they don‘t want to increase their liabilities by paying out bonuses.

'Investors have got to be realistic,' he added. 'While the point of with-profits is smoothing - keeping back some returns one year to pay them in years of poor market performance - the life companies cannot go on paying bonuses indefinitely, particularly considering what‘s happened in the market in the last few years.'

AMP Pearl has three with-profits life arms, including Pearl and MPI policies - both new and old ones acquired from National Provident Life. But bonus payouts will be different for each sector.

How has your with-profits policy performed? Keep track of the latest bonus news with our up to the minute coverage by clicking here