Life insurer Scottish Widows have announced improved bonus rates for 2006, bringing a measure of cheer for around 70% of its with-profits policy holders, including those with endowment mortgages.

The change will improve payouts for around 700,000 policy holders, with a rise of around 2% for ordinary with-profits bonuses, and up to 5% for unitised policies.

Final bonuses have also been improved, while MVRs - Market Value Reductions, or the penalty imposed on people surrendering their policies - have been reduced too. Strong pre-tax profits at a level 50% higher than the previous year are behind the MVR reductions.

It’s not all good news though, as final payouts on maturing policies continues to fall. An average payout this  year will be around 5% lower than for an equivalent policy which matured last year.

The Edinburgh-based insurer said that this reflected the fact that policies maturing this year had one less year’s worth of investment returns from the boom years of the 1980s and 1990s, and an extra year of today’s lower return levels.

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