IMPORTANT! This is MoneySavingExpert's open forum - anyone can post

Please exercise caution & report any spam, illegal, offensive, racist, libellous post to forumteam@moneysavingexpert.com

  • Be nice to all MoneySavers
  • All the best tips go in the MoneySavingExpert weekly email

    Plus all the new guides, deals & loopholes

  • No spam/referral links
or Login with Facebook
Endowment Final Bonus
Closed Thread
Views: 2,930
Thread Tools Search this Thread Display Modes
# 1
splinter1955
Old 19-09-2008, 12:20 PM
MoneySaving Newbie
 
Join Date: Sep 2008
Posts: 5
Angry Endowment Final Bonus

hello i was wondering if anyone could offer advise concerning a final endowment bonus. I have a policy due to mature June 2009 and have been informed by the insurance company that a final bonus will not be paid on my 16 year policy when it matures. However a final bonus will be paid on a policy that is only for 10 years. This to me does not make sense as i would have thought that if a final bonus was available to be paid out a policy with a longer term would in fact receive some of the benefit.Can anyone offer advise? Thanks
splinter1955 is offline
Report Post
The Following User Says Thank You to splinter1955 For This Useful Post: Show me >>
# 2
EdInvestor
Old 19-09-2008, 12:36 PM
Deliciously Dedicated Doubly Diehard MoneySaving Devotee
 
Join Date: Sep 2004
Posts: 15,682
Default

Which company is it with?

The amount of final bonus depends on how well the markets did over the term of the policy and this will vary depending on the time frame. For instance a 10 year policy which matured in 2000 with 10 good years would do much better than a 10 year policy maturing in 2008, which would have suffered from 2 stockmarket crashes.There are other issues involved as well.
EdInvestor is offline
Report Post
# 3
hedgehunter
Old 19-09-2008, 12:54 PM
MoneySaving Convert
 
Join Date: Apr 2007
Posts: 48
Default

Terminal bonus represents the difference between the policies guaranteed benefits and asset share. What a zero terminal bonus means is that the guaranteed benefits (the sum assured and the existing annual bonus) exceeds the value of the asset share (this is the accumulation of the premiums plus smoothed investment returns less expenses and taxation).

For the 16 year term policy is it most likely that greater amounts of annual bonus has been added over the term than has been added to the 10 year term policy, and so the policy guarantees are higher.

Sorry its a bit technical, but so is the question!
hedgehunter is offline
Report Post
The Following 2 Users Say Thank You to hedgehunter For This Useful Post: Show me >>
# 4
splinter1955
Old 19-09-2008, 1:10 PM
MoneySaving Newbie
 
Join Date: Sep 2008
Posts: 5
Default

Phoenix Life
splinter1955 is offline
Report Post
# 5
splinter1955
Old 19-09-2008, 1:45 PM
MoneySaving Newbie
 
Join Date: Sep 2008
Posts: 5
Default

Quote:
Originally Posted by EdInvestor View Post
Which company is it with?

The amount of final bonus depends on how well the markets did over the term of the policy and this will vary depending on the time frame. For instance a 10 year policy which matured in 2000 with 10 good years would do much better than a 10 year policy maturing in 2008, which would have suffered from 2 stockmarket crashes.There are other issues involved as well.
The company is now Phoenix Life (was Brittanic)
The example you give I completely understand. What I do not understand with Phoenix is that my 16 year policy had some very good years returns(which I assume means they too must have made good profits) and receives no TB,whereas a 10 year policy to mature 2009 has had a less fortunate return but is rewarded with a TB
The fact that I(as Phoenix said) have already had my fair share of profits is only down to the fact I started the policy in a better financial market than the guy who joined the "pot" 6 years later.
splinter1955 is offline
Report Post
# 6
EdInvestor
Old 19-09-2008, 6:58 PM
Deliciously Dedicated Doubly Diehard MoneySaving Devotee
 
Join Date: Sep 2004
Posts: 15,682
Default

Quote:
Originally Posted by splinter1955 View Post
What I do not understand with Phoenix is that my 16 year policy had some very good years returns(which I assume means they too must have made good profits) and receives no TB
Here comes the other issue I mentioned. Up until around 2000, companies awarded quite substantial declared (aka reversionary aka annual )bonuses, often in the 5% range.These are guaranteed. Up until 2003, there was no requirement to reserve for these guarantees (or the guaranteed sum assured).Then the FSA enforced the rules.Thus a much bigger percentage of the assets backing your policy are in low risk low return assets such as bonds and cash, to guarantee your existing bonuses.

After 2000, and especially after 2003,companies reduced their guaranteed annual bonuses to much lower levels, sometimes nil to avoid having to put more money into low return assets.In some cases such as Phoenix, the amount of assets backing some policies is actually less than the guarantees provide, because the company lost so much in the 2001-03 stockmarket crash.Such policies will have received no recent bonuses at all of either kind.

Younger policies will receive much lower guaranteed bonuses and larger unguaranteed terminal bonuses. In a way these are much more like unit linked policies than traditional With profits.

Basically you are now paying for the security the higher guarantees offer through lower returns.The With Profits fallacy, believed for many years, was that it supposedly offered high returns and security at the same time.

But as we all know, there's no such thing as a free lunch.
EdInvestor is offline
Report Post
The Following 2 Users Say Thank You to EdInvestor For This Useful Post: Show me >>
# 7
splinter1955
Old 20-09-2008, 10:32 AM
MoneySaving Newbie
 
Join Date: Sep 2008
Posts: 5
Default

Quote:
Originally Posted by EdInvestor View Post
Here comes the other issue I mentioned. Up until around 2000, companies awarded quite substantial declared (aka reversionary aka annual )bonuses, often in the 5% range.These are guaranteed. Up until 2003, there was no requirement to reserve for these guarantees (or the guaranteed sum assured).Then the FSA enforced the rules.Thus a much bigger percentage of the assets backing your policy are in low risk low return assets such as bonds and cash, to guarantee your existing bonuses.

After 2000, and especially after 2003,companies reduced their guaranteed annual bonuses to much lower levels, sometimes nil to avoid having to put more money into low return assets.In some cases such as Phoenix, the amount of assets backing some policies is actually less than the guarantees provide, because the company lost so much in the 2001-03 stockmarket crash.Such policies will have received no recent bonuses at all of either kind.

Younger policies will receive much lower guaranteed bonuses and larger unguaranteed terminal bonuses. In a way these are much more like unit linked policies than traditional With profits.

Basically you are now paying for the security the higher guarantees offer through lower returns.The With Profits fallacy, believed for many years, was that it supposedly offered high returns and security at the same time.

But as we all know, there's no such thing as a free lunch.
Thanks EdInvestor. Looks like the preverbial paddle has gone missing again.
splinter1955 is offline
Report Post
The Following User Says Thank You to splinter1955 For This Useful Post: Show me >>
# 8
sheslookinhot
Old 20-09-2008, 3:57 PM
Serious MoneySaving Fan
 
Join Date: Jan 2008
Location: I'm in the phone booth, it's the one across the hall
Posts: 1,080
Default

I wonder if the terminal bonus is in fact to annual bonus's. I would have thought annual bonuses were established after the latest set of annual accounts were known. I.e.the annulal bonus was decided after the last years performance of the greeater fund.

I wouldn't have thought that there would be no terminal bounus because of good annual bonuses being added in certain years.

I would try and get accturial advice on this one.
2013 MFW challenge
Target:- Mortgage Free this year
b
alance at 1 Mar= 1,931
sheslookinhot is offline
Report Post
The Following User Says Thank You to sheslookinhot For This Useful Post: Show me >>
Closed Thread

Bookmarks
 
 




Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

 Forum Jump  

Contact Us - MoneySavingExpert.com - Archive - Privacy Statement - Top

Powered by vBulletin® Copyright ©2000 - 2014, Jelsoft Enterprises Ltd.

All times are GMT +1. The time now is 5:14 PM.

 Forum Jump  

Free MoneySaving Email

Top deals: Week of 22 October 2014

Get all this & more in MoneySavingExpert's weekly email full of guides, vouchers and Deals

GET THIS FREE WEEKLY EMAIL Full of deals, guides & it's spam free

Latest News & Blogs

Martin's Twitter Feed

profile

Cheap Travel Money

Find the best online rate for holiday cash with MSE's TravelMoneyMax.

Find the best online rate for your holiday cash with MoneySavingExpert's TravelMoneyMax.

TuneChecker Top Albums

  • ED SHEERANX (DELUXE EDITION)
  • SAM SMITHIN THE LONELY HOUR (DELUXE EDITION)
  • STATUS QUOAQUOSTIC (STRIPPED BARE)

MSE's Twitter Feed

profile
Always remember anyone can post on the MSE forums, so it can be very different from our opinion.
We use Skimlinks and other affiliated links in some of our boards, for some of our users.