Norwich Union cuts payouts

HOLDERS of longer-term policies at Britain's largest insurer, Norwich Union, will suffer further cuts to maturity payouts despite a positive return for the group's £50bn with-profits funds in 2003.

Norwich Union, part of Aviva, is reducing payouts on policies essentially taken out more than 15 years ago by an average of 5% to 10% - its fifth round of cuts over the past two years.

This means the total payout on a £50-a-month, CGNU 25-year mortgage endowment is now £59,444 against £63,819 last July - down 6.8%.

But punters taking policies out last year will benefit from an 11.5% investment return by the with-profits fund in 2003, which compares with a fall of 8.6% in 2002.

Actuary David Riddington said: 'We are seeing less pressure for the sort of level of cuts we experienced in 2002.'

Norwich Union has reduced the market value reduction (MVR) that customers suffer if they for cashing in unitised with-profits policies from an average of 9% to an average of 8%.

The company says the growth in the stock market will lead to some improvement in the position of mortgage endowment policies.

'As a result many policyholders would see slightly lower projected shortfalls or slightly higher projected surpluses now,' it said.