Europe's biggest mutual life assurer, Standard Life, has introduced a 10% exit penalty for its with-profit pension and endowment policy holders.

In addition, the group has cut bonus payments to policy holders by 10%.

It is the first time that Standard Life, Europe's biggest mutual assurer, has levied such a hefty exit penalty.

The penalties were introduced to prevent fears over falling stock markets leading to a large number of policy holders surrendering their policies early.

Several of Standard Life's competitors have operated exit charges for some time.

Tipping the balance

Until the end of July, the Edinburgh-based assurer said it had not experienced many early policy surrenders.

In April, the company reported record levels of new business, helped by a sharp lift in sales of pensions.

But the group has been blown off course by the summer's stock market falls.

The assurer has 70% of its with-profit funds invested in shares - higher than most of its rivals that have reduced the amount of shares they hold.

Back in 2000, Standard Life was under threat of demutualisation.

At that time it was estimated that the group had reserves of up to £10bn.

These reserves are believed to have fallen to around £2bn.

In response, bonus pay-outs have been cut and exit penalties imposed.

Back in February Standard Life cut its bonus payments on life and pension products by 9.4%.

---

Were you affected by Standard Life's decision? Are you worried about your financial future?
BBC News Online has asked an independent financial adviser about some of the questions readers have raised about the insurer's decision (see story on right: "Standard Life questions answered") or go to Business, Your Money.