Standard life is to cut annual bonus payments on life and pension products by up to 9.4%, because of volatile stock market conditions over the last 12 months.

The company, which is Europe's biggest mutual insurer, is one of a growing list of insurers who are revising payments on with-profits policies in the light of a 15.8% fall in the FTSE 100 last year.

Payouts will fall by 8% on average and affect people cashing-in their with-profits policies, as well as 'active' policies, which are not due to mature for a number of years.

"Stock markets remain volatile, and there is increased uncertainty over future investment returns," said John Hylands, group finance director.

Real impact

The cut in rates will hit those people whose policies mature this year.

For example, a twenty-five year policy maturing on 1 February 2002 would be worth just �99,747 compared to �110,136 a year ago - equivalent to a drop of 9.4%.

But those people who are still paying into policies will also suffer a drop in their policy values

For example, someone with an endowment, will see a their annual bonus rate reduced from 4.5% to 4%.

Pension savers will see their bonuses reduced from 5.5% to 5%.

Endowment mortgages

During the last year, Standard Life's with-profits fund produced a return of -10.2%.

With-profits policyholders, however, will not see their policies cut by so much as with-profits policies "smooth" falls from bad years with gains held back from years of good growth.

Financial advisers, however, are warning investors to be vigilant, particularly those who are using a with-profits policy, such as an endowment, to pay off a mortgage.