Life assurer Standard Life heaped more bad news on beleaguered investors yesterday by announcing it was slashing payouts on its long-term savings policies by about 15 per cent.

The mutual blamed "extremely difficult investment conditions" for the third reduction in bonuses on life and pensions with profits policies in just over a year.

It also warned there was likely to be more pain to come, with future investment returns looking set to be lower than those seen in the past and bonus rates likely to continue falling.

The society is the latest in a long line of life insurers to cut bonuses on with-profits policies.

Insurers first began reducing them about 18 months ago and since then Prudential, Norwich Union and Scottish Widows have all reduced them three times in just over a year, while Britannic recently announced it was deferring its annual bonuses.

With-profits policies aim to smooth out stock market volatility throughout the course of an investment, withholding some growth in strong years to pay returns in bad ones.

The policies are often taken out as pensions, as an endowment policy to pay off a mortgage, or as a lump sum investment in the form of a with-profits bond.

But they have been hit by three consecutive years of stock market falls, forcing insurers to cut bonuses to reflect reduced investment returns.

Yesterday's move by Standard Life will reduce the maturity value of a 25-year savings policy into which £50 a month had been paid to £75,984 if it matured today from £89,537 before the cut was announced.

The value of a 25-year pensions policy into which £200 a month had been paid will fall to £500,414 from £586,959.

The society said around 1.36 million of its 2.3 million UK with-profits customers took the policies out to pay off an mortgage.

Standard Life is due to write to all mortgage endowment customers during the next two months warning them if their policy is unlikely to be big enough to pay off their mortgage.

The society said when it last sent out letters during the past 18 months, only around 17 per cent of customers had a policy which either would not or might not be large enough to pay off the debt.

But it admitted the proportion of customers in this position is likely to have increased since.

The company also announced it would be reviewing the level of bonuses it paid out every three months from now on, rather than every six months.

The society has reduced its holding in equities from almost 80 per cent at the beginning of 2002 to 55.3 per cent at the end of the year.