Millions of savers with Standard Life are to see bonus payments on their pensions, life insurance policies and other investments slashed.

Investment returns on everything for everyone have declined Simon Douglas, Standard Life

Standard Life blamed "extremely difficult investment conditions" for a decision to reduce payouts on so-called "with-profits" funds.

Such policies are meant to pay bonuses when the value of the stocks and bonds they are based on rises.

"The bonus payments on with-profits products are dependent on the state of the markets.

Investment conditions remain extremely challenging

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"And investment returns on everything for everyone have declined," said Simon Douglas, managing director of marketing at Standard Life.

The move follows bonus cuts by rival insurers such as Norwich Union and Britannic.

Cut details

Standard Life has about 2.1 million with-profits policyholders in the UK.

Those paying into unitised life policies will see the bonus rate cut from 4.0% to 3.25%.

For holders of unitised pension plans, bonuses will drop from 5.0% to 4.25%.

On conventional life policies, the bonus on the assured sum will fall from 2.25% to 1.0%, with the bonus sliding from 3.0% to 2.25% on conventional pension policies.

'Better returns'

The cuts were dubbed "pretty deep" by one analyst at a US bank.

But the analyst added: "Seen in the context of what the rest of the insurers have done and will do, it's just par for the course.

"The key thing for policyholders now is to hang in there if they possibly can because, for all the doom and gloom, the return on these investments is better than they will get elsewhere."

With the longest bear market in 30 years, the UK life insurance sector is facing a tough test.

Standard Life's faith in equities meant that it has been hit hard by the recent stock market falls.

It has now cut its exposure to equities from more than 70% last year to around 57%.

John Hylands, Standard Life's group finance director, said: "The returns we are delivering to our customers are highly competitive and compare favourably to other investment choices."

A 25-year Standard Life with profits endowment policy maturing on Monday would provide a return equivalent to 11.3% growth per annum, compared with 8.2% a year for the sector average, the firm said.

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Have you been affected by bonus cuts on your pension? What impact will Standard Life's cut have on you?

The people to feel sorry for are those who have recently opted to retire based on their fund value in the past few months. They will now be faced with a shortfall on their expected fund value. I personally suffered this fate last September with Standard Life, my fund decreasing by �40,000.00 from the estimate provided in June, to the sum transferred in September.
Garth Fletcher, England

Standard Life are taking sensible precautions to protect policyholders. Mike Shaw, Wales

As an IFA I get a better insight in Standard Life than most. All life companies have taken a battering this year and in my view Standard Life are taking sensible precautions to protect policyholders. They still have massive cash flow coming in which dilutes their reliance on shares and puts them in a stronger position for the upturn. The exit penalties are there to protect long-term investors - don't panic!
Mike Shaw, Wales

Standard Life had no option other than to cut rates. The stock market has fallen in value by over 60% over the last 2 years. Standard Life have only reduced rates by an average of 15%, taking the rest of downturn themselves. It would be very dodgy if they hadn't reduced rates because it would then put a question mark over the firm's long term future. On average an endowment plan has returned approximately 10% per annum growth - show me a bank account which has produced that!
Simon Hebb, UK

When I reached the age of 21 with my then employers it was mandatory for me to join the company pension scheme. I accrued 20 years pension rights with that company before moving to another job, and transferred my pension to Standard Life in 1991 as I hoped to retire early and I believed that this move would give me more control of my options. In recent years I have seen my projected pension diminish at an alarming rate. I have been paying pension for approx. 34 years, and was until recently fairly sure of a comfortable retirement. Now, at the age of 58 I have no clear idea of what my pension will be worth when I reach NRD, and I have given up any thought of early retirement. Will anything be done to help out those who have lost or are in the process of losing their life savings?
Alistair Cochrane, UK

Do people really believe that things won't recover? Patrick, UK

I have a pension with Standard Life. There is no need for me to worry as it does not mature for 14 years. Do people really believe that things won't recover in that time? If so they are only being driven by fear and misunderstanding. People who surrender savings plans when the market is down are losers and should hold on until they pick up again. Just look at history for goodness sake, and get real!
Patrick, UK

The Government encourages us to save into pension fund and gives us tax breaks for that. The problem is that all this pension fund saving is not guaranteed! Whether we are in a private pension fund or a company pension fund. It would be better for the government either to guarantee these kinds of investment or allow us to save how we want to with the benefit of the tax breaks. At least then if we make a mistake on our saving, we are only to be blamed, rather than losing when these highly paid pension executives make mistakes and we still suffer!
Jamil Hashim, UK

My partner and I bought a flat six months ago, taking a Standard Life endowment to cover half the mortgage. While it is pretty early days yet, it certainly looks now as if our endowment is not going to cover our mortgage repayment. At a time when all is doom-and-gloom in the housing market in general, I am beginning to panic.
Tom, UK

It's pointless to try and make provision for retirement Anon, UK

The consequences of Standard's unilateral actions are particularly dire for me and my wife. I am now unable to retire at 60 as planned and cannot transfer my with profits funds into managed funds to take advantage of any rise in the stock markets without losing 25% of the value of my pension fund.

Standard Life has also reduced their annuity rates so my much-reduced pension will purchase even less. It's utterly pointless to try and make provision for retirement but to be profligate throughout one's working life and enjoy the benefits at the time.
Anon, UK

Why is your headline so alarmist? Why not concentrate on the positive returns achieved on investors funds? Their with profits fund has produced returns on a per annum compound basis well above inflation despite the recent crash in equity markets. If the media took a more constructive approach to reporting such results it would create greater confidence in consumers' minds and help to promote savings which is essential for the future wellbeing of the individuals concerned.
Roy Lynes, U.K.

The advice to stick with long term savings is a con Ben, UK

I had two ten year savings plans for my children. After nine and seven years respectively, they were both worth considerably less than I had paid in. I have now cashed both them in and bought premium bonds. The advice to stick with long term savings is a con. Get out now.
Ben, UK

I have an endowment mortgage, backed by a Standard Life policy, and less than a month ago, my annual statement said it probably won't meet the capital outstanding on my flat when it matures. Now the situation is even worse than we had been led to believe.

Whilst I understand the market pressures that cause this, the habit of the financial sector of saying, "It's fine, don't worry - oops, you should have worried, but it's too late now...." bordering on the ludicrous. They employ analysts to predict the market conditions, and to give advice but have no liability, and we end up paying for their crass incompetence.
Eddie Dubourg, Scotland

I'd have been better off with a normal bank account! Nick, UK

I have two endowment policies. One should pay my mortgage in 25 years time, but looks already like it won't, the other was sold to me as an investment when I had some spare money (Why is it not in an ISA? Good question, ask my adviser!).

I was sold these policies on the promise of 10% growth per year "They've never done less than 7%" I was told. I get around 2%. It amazes me that there is nobody being hung for such blatantly incompetent practices, I'd have been better off with a normal bank account!
Nick, UK

I was just telling my father on Sunday about my worries for my pension. I felt reassured when he told me that Standard Life is pretty much a safe bet. This has put the fear up me again. Am I just throwing my money away? What guarantees are there that SL won't go belly up? What are the government doing to quell these fears?
Ian Jones, UK

I already pay 17% of my gross salary into a Standard Life pension. Prospects of anything other than a very meagre payout are diminishing fast. Those people (firefighters included) who are in a final salary scheme should count their blessings and not be greedy.
Peter, UK

This news is just the worse. I am now facing a large shortfall in my mortgage because all the policies I have for my endowment are not performing how I was told they would. Further, my pension is with Standard Life. I think I will just run away and live on a beach somewhere warm!
Christine Gawen, UK

All the focus seems to be on the life business affecting savers. However Standard Life Bank last week also increased their mortgage interest rates so have got us both ways as we have an endowment policy and our (repayment) mortgage with them.
Amanda Glendinning, England