There is little respite for hard pressed with profits policyholders, with Royal London announcing a cut to bonus rates.

The life assuror said on Monday it had reduced the terminal bonus rate on many with profits policies in its closed Scottish Life fund.

Although final bonus rates maintained unchanged for shorter term plans those of 10 years they were cut across the board for those of 15 years or more.

Policies with a 15 year term have suffered a 3.75 percent cut in final bonus to 11.25 percent, while 20 and 25 year plans have seen reductions of 5.25 percent and 7.5 percent to 19.75 percent and 37.25 percent respectively.

That means that the maturity value of the average 25 year endowment policy has tumbled 9 percent in the past eight months alone to 43,095 pounds on 1 September from 47,337 on 1 January based on monthly premiums of 50 pounds.

Payouts on mortgage endowments suffered a similar fate, with the maturing value of a 25 year policy falling 9.5 percent to 40,621 pounds.

Meanwhile, final bonuses on with profits pension plans of 15 years or more were also down.

The largest cuts were to single premium policies. A 15 year policy maturing on 1 September attracted a final bonus of 9.5 percent, down 7.5 percent on January's figure of 17 percent, and 20 year plans were subject to an 11.75 percent bonus cut down to 29.25 percent from 41 percent.

Stephen Shone, finance director at Royal London, attributed the fall in final bonus rates primarily to an increase in liabilities relating to guarantees which apply to certain policies in the fund.

Final bonuses have been reduced in order to maintain a fair relationship between payouts and underlying asset shares, he said.

He said the policies still represented real value, with each giving an annualised net return of 7 percent or more.

However, with profits policyholders were warned to brace themselves for further falls in maturity value, as fund performance falls far short of that of previous years and life offices use what they do make to shore up depleted reserves.

Gordon Wilson, a director at Clark Thomson Shepherd Investors, said: With all the pressures that with profits funds are under whether that be in guarantees, the FSA's (Financial Service Authority's) accounting procedures or its 'treating customers fairly' rules I can't think of any reason that would mean with-profits returns will be at all attractive going forward.

There are much better, more flexible alternatives around.

During the mid 1990s, with profits which aim to smooth returns by holding back some of the profits in years of strong stock market performance to pay out in the bad was the main avenue for investors looking for a long term secure investment.

Billions flooded into the sector, which was seen as relatively low risk, had guaranteed bonuses, the potential for final bonuses and typically 70 per cent invested in equities.

However, the bear market of 2000 to 03 wrecked havoc, and, despite stock market improvements, experts warn payouts on long term policies are unlikely to improve.

Investment London