Equitable Life has revised downward its outlook for Irish pensions business for 2001, reducing the ongoing rate of return from 8 per cent to 6 per cent. The interim rate was set at 8 per cent in March.

The mid-year correction will affect some 15,000 Irish policyholders but a greater disappointment is reserved for Equitable Life's UK policyholders. The society announced yesterday that it was reducing final bonuses payments for 400,000 UK with-profits policyholders.

The 240-year-old mutual, which was forced to stop taking new business last December, said pension policies for UK with-profits policyholders would be reduced by an amount equal to 16 per cent of the policy value as at December 31 2000.

The reduction is 14 per cent for life assurance policies.

In addition there will be no growth on these policies for the first six months of this year. Equitable Life blamed the reductions on poor stock market returns over the past 18 months. In a statement, the society said it could not keep adding growth to policies while the underlying investments were falling. It referred to the FTSE 100 which has fallen by almost 20 per cent since January 2000.

Things are looking a bit brighter for Irish policyholders. A company spokesman said the divergence between policy values and asset values was not such an issue in the Republic where the values are "reasonably in line". He explained that this was because the Irish fund was more heavily weighted in Irish equities, which have had a return of 29 per cent since January 2000.

Equitable Life's chairman, Mr Vanni Treves, told UK policyholders the mutual very much regretted the need to reduce bonuses and the great concern this would cause policyholders, particularly after the disappointments they had suffered in the past year.

"Given the impact of market movements, the board believes that this action is absolutely necessary and is in the long term interests of policyholders," he said.