Bonus payments have fallen despite a rebound in share prices

Payments on the majority of policies have been reduced, with some annual bonuses cut entirely.

In addition, 100,000 investors whose policies mature this year will face final payout cuts of up to 10%.

Norwich Union blamed the reductions on poor stock market performance, despite a dramatic rise in share prices during the second half of 2003.

Fourth cut

With-profits policies are designed to smooth out the peaks and troughs of stock market volatility.

Profits made in good years are kept in reserve to pay investors an annual bonus even when the stock market performs badly.

Slumping share prices throughout 2001 and 2002 forced most firms to trim bonus rates on their policies.

Norwich Union regular bonus rates Unitised with-profits Pensions no change from 3.5% Stakeholder pensions no change from 4% Life insurance no change from 4.25% Conventional with-profits Commercial Union no change from 0%/0.5% CGNU no change from 0/0.5% Provident Mutual falls from 0.5% to 0% Source: Norwich Union

Norwich Union, part of the Aviva group, has now cut bonuses for many of its 3.3 million policyholders four times in the last two years.

Simon Quick, a Norwich Union spokesman, defended the company's performance in an interview with BBC News Online.

"Even with some falls in bonus levels we are still paying out 110% of earnings to our policyholders," he said.

"However, by keeping faith with shares we have benefited from the market upturn which has allowed us to keep many bonus rates unchanged."

Norwich Union final payouts Unitised with-profits In most cases final bonuses remain the same as 2003 Conventional with-profits Pensions between 5% and 10% cut Life insurance 10 and 15 year term unchanged Life insurance over 20 year term 5% cut Source: Norwich Union

Mr Quick pointed out that despite the spate of bonus cuts a 25-year endowment had returned 6.4% a year after tax.

The return on the with-profits fund, meanwhile, has grown by 11.5% in 2003 compared to a loss of 8.6% in 2002.

The biggest losers from Norwich Union's announcement are Commercial Union and CGNU pension holders whose policies mature this year and will see their final payouts cut by up to 10%.

Your comments:

The most recent feedback I had from Norwich Union showed a considerable shortfall on my endowment. In fact, if I'd put the monthly payment into a building society account at an average of 5% interest - I'd have made more than Norwich Union tell me they've made on my investment. This is nothing short of incompetent!
Danny McKissock, Hayling Island, UK

My endowment policy is not even growing by as much as I'm paying into it. I obtained surrender value quotations in early October and late December and the value had increased by �180 despite me paying in �201 in that period. At this rate I'd be better to surrender and put the value plus future premiums into Premium Bonds - at least it won't lose any more.
C Robson, Edinburgh

If you consider the recent performance of my pension and endowment - managed by professionals - then I believe I could have done better myself. Members are trapped by the greed and incompetence of directors of companies with no real means of fairness and justice.
A Aitken, Scotland

How can they cut bonuses, even if the market has gone up? We suffer if the market goes up and if it goes down and we can't sell the policy because its far less than we've paid in. We should vote with our feet, if Norwich Union think they are getting my car insurance policies and housing policies from now on, they can think again.
Nicholas Wright, Manchester, UK

My relatively small �10,000 endowment with profits policy with Norwich Union matures in February 2004. I am extremely disappointed with the NU decision to cut final bonus payments by 10% this year when their with profits fund generated a healthy return of 11.5% in 2003. It appears very unfair.
David Lawford, Camberley, England

I had wanted an ordinary repayment mortgage but was told this was not how people did things. I was mis-sold three Norwich Union endowment policies prior to the Financial Services Act by independent financial advisers (IFAs) who are no longer in business. I have been lied to and now, due to cuts in bonus rates, will not have enough to pay off my mortgage. Due to the start dates of my endowments I cannot even go to the Ombudsman and the FSA doesn't want to know. Is nobody going to help customers like me? Do the product providers have complete freedom to take our money under false pretences?
Barbara Holland, Epsom, Surrey

Being semi-retired, I heavily rely on income from "With Profits Bonds". The income from these has been cut dramatically over the last few years. Also you are unable to get out, due to the high penalties now applied. Norwich Union call themselves investment Managers, I could have done better myself with long time building society deposits, over the past seven years.
Michael Dunn, Capel, Surrey

Corporations are more concerned with looking after their shareholders and directors than their customers. Standard Life customers beware!
John Crocker, Clacton on Sea, Essex