By Charlotte Beugge

Standard Life yesterday started off the with-profits bonus season by cutting maturity payouts and holding or maintaining bonuses for its policyholders.

With-profits funds are massive insurance funds used to provide pensions, endowments and bonds for customers. They are invested in a mixture of shares, cash and other investments.

Unlike other funds, with-profits funds declare an annual bonus each year which is paid to policyholders as well as usually a terminal bonus when their policy matures.

The annual bonus is not the same as the growth over the year on the fund - while the Standard Life fund has grown by 8.7% in the year to December, it is paying bonuses of 3% on unitised with-profits endowment and 4% on pensions, the same returns as in the previous year.

About half of Standard Life's 1.5 million with-profits customers will have their bonuses cut. Standard Life says that 98% of its 500,000 mortgage endowment policies are not on track to repay customers' mortgages.

A benchmark 25-year savings endowment, taken out by a man aged 29 at the start with premiums of £50 a month, would now pay out £28,439. The comparable figure for last year was £28,900, a fall of £461 over a year.

For a 20-year pension with premiums of £200 a month taken out by a man retiring at 65, this year the payout would be £78,493 compared with £80,792 for the comparable policy maturing last year.