With profits fund: Throwing good money after bad

mike004 wrote: »

Question 2: Did the fund managers get sacked for their incompetence, I wonder?

No, they'll have got a fat bonus - where do you think all your money went?

Its slightly better than you suggest - on average they'll have only had your money for 15 years not 30, so the annualised percentage return is double what it appears at first.

As for whether the managers get sacked, well that partly depends on whether they've actually done a bad job - what is their performance benchmark ?

You've so far made 8K on 12K, and the 12K has been invested for on average 10 years - I make that about 5% per annum, which is not bad

i paid in 11205 and got out 18600 -standard life with profits endowment -after 23 years of the 25 year policy--the terminal bonus was going to be 3,4 and recently fixed by sl --i hate to think what percentage profit that is

The annual bonus is just one part of the return. There might also be a final bonus. The trend in recent years has been for annual bonuses to be at added at a low rate. Final bonus can add a significant amount to the returns, but it is not guaranteed at all. Final bonus rates are linked to recent investment returns. A lot of companies reduced final bonus rates greatly following the large falls in markets over 2008.

Anything that has been added through the life of the policy as an annual bonus is guaranteed. and becomes a liability as far as the insurance company is concerned. This means money has to be allocated to cover this liability and can't be invested in anything risky. I think rules about this were changed following the Equitable scandal (Equitable collapsed when they guaranteed benefits they could not afford). Money not used to cover guaranteed benefits can be invested in riskier assets, like shares and property, which has the potential for higher returns, but of course there are no guarantees. This is the case for open funds anyway, closed "zombie funds" are as I understand it mainly geared towards covering existing liabilities and so are mainly invested in fixed interest securities with little prospects of growth.

mike004 wrote: »

Anyone had experience of what final bonuses are like for funds that are maturing nowadays?
I suppose if I expect nothing, anything will be a pleasant suprise
Mike

Negligible.

I've 20+ yrs in a ClericalMed pension WP fund thats yielding TB of about 3% ( it was circa 30% a couple of years ago in the heady days of 2007 when FTSE touched 6300ish)