InsurER AXA yesterday announced it was reducing payouts on some of its long-term savings policies by an average of five per cent.

The group blamed three years of falling stock markets for its decision to cut the terminal bonuses it paid on some life and pension products invested in the AXA Sun Life and Sun Life Assurance Society with-profits funds.

But it said that regular bonuses on its products remained unchanged, and terminal bonuses had been cut on only about 16,000 of its 1.5 million with-profits policies.

The policies, which are often taken out as a pension or endowment, have been hit by three years of falling markets, leading many insurers to reduce the bonuses they pay on them.

Peter Shelley, chief actuary at AXA, said: "The stock market recovery has been modest relative to the severity of the falls experienced between 2000 and 2003.

"As a result, this change to terminal bonuses is needed to ensure that our with-profits payouts remain fair to all policyholders and properly reflect investment conditions over the past few years."

Yesterday's announcement means someone who had paid £50 a month into an endowment policy for 25 years would see their final payout reduced to £46,689, compared with £49,323 if their policy had matured last month.

Someone who had paid £200 a month into a pension for 20 years would see the maturity value of their policy fall to £139,777, compared with £147,196 before yesterday's announcement.