The insurance company said it had been forced to take the action because of the significant falls in the world's major stock markets this year.

We have taken this action so that payouts more fairly reflect the value of the underlying assets

Ian Gibson, Legal & General actuary

And it said it was trying to balance the interests of different with-profits customers.

Payouts will typically fall by up to 7.5% for life policies and up to 9.5% for pensions policies.

The actual reductions will depend on the length of time the policy has been in force and the type of policy.

For example, someone who had paid �50 a month into an endowment policy for 25 years could see the value of their final payout fall to �66,348 from �71,423.

Raising money

Legal & General actuary Ian Gibson said: "We have taken this action so that payouts more fairly reflect the value of the underlying assets and so to balance the interests of customers whose policies are due to mature now and those whose policies are due to mature in the future."

Legal & General is the latest in a series of insurers to cut final bonuses.

Standard Life, Norwich Union and Friends Provident have all cut final bonus ratest this year because their funds have been depleted by falling stock markets.

Last month Legal & General announced plans to raise up to �786m through a rights issue.