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Aviva Endowments - Terminal Bonus Rate
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# 1
crookedmouth
Old 10-05-2011, 9:25 AM
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Default Aviva Endowments - Terminal Bonus Rate

I just spoke to Aviva this morning re my endowment. I thought it might be of some use to users as I've had a lot of trouble finding information on the web

My £35 per month endowment is projected to return, in 2015

at 4% ==> £9,500
at 6% ==> £10,400
at 8% ==> £11,300

against a sum assured of £6,100.

Their current final bonus rate is £235 per £1000 assured...

...which is a pretty abysmal 2.35%, compared to L&G (~70%) and Zurich (~100%).

Nevertheless some simple maths suggests that a surrender is probably not a good idea.

Can anyone confirm that the final bonus rate quoted by other companies is calculated against the sum assured rather than the final payout?

I'd be grateful for any thoughts.
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# 2
dunstonh
Old 10-05-2011, 9:43 AM
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Quote:
Their current final bonus rate is £235 per £1000 assured...

...which is a pretty abysmal 2.35%, compared to L&G (~70%) and Zurich (~100%).
You cannot compare them that way.

What was the target growth rate?
What version of the endowment was it?
Was it a mortgage endowment or a savings endowment?
Which particular With Profits fund is it in?
I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
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# 3
crookedmouth
Old 10-05-2011, 10:34 AM
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Originally Posted by dunstonh View Post
You cannot compare them that way.

What was the target growth rate?
What version of the endowment was it?
Was it a mortgage endowment or a savings endowment?
Which particular With Profits fund is it in?
I had always assumed that the FB rates advertised by the various companies would be comparable, so you're pushing the limits of my understanding

The Aviva endowment is a Low Cost mortgage endowment, "participating in M1 Bonus Series 6 Endowment Bonuses". I don't know if that answers your questions.

As to my other 2 endowments (with Zurich and L&G) they were taken out to serve the same purposes (mortgage payoff) and all of them will be paying out in the next two to five years, so it would certainly be nice to make a fair comparison.

On the other hand, my entire mortgage is now repayment so the endowments are "bonuses" and the question is somewhat moot.
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# 4
dunstonh
Old 10-05-2011, 11:42 AM
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Quote:
I had always assumed that the FB rates advertised by the various companies would be comparable, so you're pushing the limits of my understanding
Over the years they have offered and inherited different product types. Some of those types allowed different target growth rates and different ways of reviewing the bonuses. Often the providers will publish the headline details on their main fund but the others will be shown in less publicised documentation.

The earlier plans often only changed the final bonus once a year. The later ones could move monthly if they wanted.

Aviva also have the mortgage endowment promise and there has been the hint in the past that their bonus rates are lower because of this promise value.


Quote:
The Aviva endowment is a Low Cost mortgage endowment, "participating in M1 Bonus Series 6 Endowment Bonuses". I don't know if that answers your questions.
I don't know the versions and the terms that go with them but you can see that this is not the first version with it being Series 6.
I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
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# 5
crookedmouth
Old 11-05-2011, 8:18 AM
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Quote:
Originally Posted by dunstonh View Post
Over the years they have offered and inherited different product types. Some of those types allowed different target growth rates and different ways of reviewing the bonuses. Often the providers will publish the headline details on their main fund but the others will be shown in less publicised documentation.
.
After a little digging, I now understand this a bit better - you'd have thought that having held these policies for nearly a quarter of a century, I'd be a bit better clued up, wouldn't you.

My Aviva endowment final bonus is calculated against the sum assured, where as my L&G final bonus is calculated against the sum of the annual bonuses. Doing the maths, that still puts Aviva well below L&G, but not by the order of magnitude that I had originally assumed from a direct comparison of their two rates.

I'm not sure how Zurich calculate their final bonus (I'll be calling them later today).

I really have no idea of what the target growth was for any of my endowmwnts but I guess that the clue is in the shortfall warning letters which give predictions based on different growth rates

Low Int High
Z - 3% 3.75% 5%
L&G - 4% 6% 8%
Aviva - 4% 6% 8%

Last edited by crookedmouth; 11-05-2011 at 8:22 AM.
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# 6
brewerdave
Old 11-05-2011, 8:57 AM
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Quote:
Originally Posted by crookedmouth View Post
I just spoke to Aviva this morning re my endowment. I thought it might be of some use to users as I've had a lot of trouble finding information on the web



Their current final bonus rate is £235 per £1000 assured...

I have a similar Aviva low cost mortgage endowment due to mature shortly (Sept. this year) and I'm in the same fortunate position of not needing the proceeds to pay off the mortgage.Can I be cheeky and ask a question since you have already done some research?

Is this final bonus rate against the original sum assured or against the sum assured plus previously declared bonuses??

I'm sure I asked that question some years ago of Norwich Union (now Aviva) and they told me, that when paid, the final bonus was a %ge of the new total value of the policy ie sum assured plus existing bonuses.
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# 7
crookedmouth
Old 11-05-2011, 9:29 AM
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Quote:
Originally Posted by brewerdave View Post
I'm sure I asked that question some years ago of Norwich Union (now Aviva) and they told me, that when paid, the final bonus was a %ge of the new total value of the policy ie sum assured plus existing bonuses.
Hi Dave - Well, I suppose it could depend on the policy, but I am pretty certain that Aviva told me it was calculated against the sum assured only. I even did some rough maths over the phone and she agreed with me.

It's worth calling them yourself to check - I was expecting the call to be long and difficult but actually they were helpful and open (gasp!). If you get a different answer to me I'd be interested to know.

I've just spoken direct to L&G and Zurich, both of whom apply the final bonus rate to the accumulated annual bonuses only.
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# 8
crookedmouth
Old 11-05-2011, 9:33 AM
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Quote:
Originally Posted by brewerdave View Post
I have a similar Aviva low cost mortgage endowment due to mature shortly (Sept. this year) and I'm in the same fortunate position of not needing the proceeds to pay off the mortgage.
I know how you must feel about that! It's a nice feeling to know that there's some money coming in soon.

My first (big) endowment pays off next year and the other two in '15. My plan is to use them to cut the legs off the mortgage. There'll still be a way to go after that but I can see the light at the end of the tunnel.
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# 9
dunstonh
Old 11-05-2011, 9:49 AM
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Quote:
I really have no idea of what the target growth was for any of my endowmwnts but I guess that the clue is in the shortfall warning letters which give predictions based on different growth rates
In the setting of bonuses, that doesnt really make a lot of difference. It makes a difference to how much you pay each month and how much you will get back at the end. Too many endowments used target growth rates that were fine for the 60s, 70s and 80s but were too high for the 90s and 2000s where things had moved on so much.
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# 10
noxida
Old 11-05-2011, 9:56 AM
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Default My policy

My policy matures november 2012, I rang them this morning and asked about the final bonus because the policy was taken out in 1987 and was formely norwich union low cost endowment the bonus at the moment is only £70 per 1000 which for me comes in at £460!just hope it doesnt go down next year.

Em.
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# 11
brewerdave
Old 11-05-2011, 10:30 AM
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Originally Posted by noxida View Post
My policy matures november 2012, I rang them this morning and asked about the final bonus because the policy was taken out in 1987 and was formely norwich union low cost endowment the bonus at the moment is only £70 per 1000 which for me comes in at £460!just hope it doesnt go down next year.

Em.
God - that would be horrendous !!!Think I'll try to phone them for clarification. At least we have the shortfall promise which should yield a few extra ££s.And I don't need the proceeds to pay off the mortgage, thank the Lord!

As dunstonh says, the growth rates used for illustrations in the 80s must have been sky high - I remember glossy images of speedboats and cruise ships being used in support of the sales literature! £50 pm was going to yield 6 figure sums. Those were the days
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# 12
noxida
Old 11-05-2011, 10:43 AM
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The guy I spoke to was helpful and explained that policies taken out later than mine were paying out more, like you said we have got the promise so every little helps, we had a 15yr endowment mature last week with Royal London and the bonus worked out at about £230 per 1000 final bonus so that was better than we had hoped.

Em.
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# 13
brewerdave
Old 11-05-2011, 10:48 AM
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Further update after phone call - my terminal bonus rate is even worse than noxida's !! £45 per £1000 of sum assured. Won't be buying a Porsche after all!!
crookedmouth-Presumably your endowment was an ex-CGNU policy not an NU one - bonus rates appear to be a LOT better in that pool!!

Being philosophical about it - at least I got £3k for misselling and some free shares in NU!!

Last edited by brewerdave; 11-05-2011 at 10:54 AM.
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# 14
crookedmouth
Old 11-05-2011, 10:54 AM
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Since there are a few people watching this one now, could someone:

1. Please explain the mortgage promise in terms tha a layman can cope with. I understand that they promise that they might top up any shortfall, but is there any way of predicting what that might means in practise? Will they make up all of the short fall or just some of it or none of it? (yeah yeah I know - it depends)

2. The reattribution. There was a lot of noise about it, but (and here's yet more evidence of my criminal lack of attention to my investments) I have no idea whether the money was ever paid out or whether it was quietly shelved. I certainly can't see any evidence of a cash windfall (and how much???) anywhere in my endowment policy records.
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# 15
crookedmouth
Old 11-05-2011, 10:57 AM
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Quote:
Originally Posted by brewerdave View Post
Further update after phone call - my
crookedmouth-Presumably your endowment was an ex-CGNU policy not an NU one
I'll have to dig out my records - these policies go back so far I'm surprised I've managed to hang on to any of the paperwork!

Re misselling - I also remember being promised round the world cruises, but of course I have no evidence to back that up so a misselling claim was never an option.
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# 16
noxida
Old 11-05-2011, 11:14 AM
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The shortfall promise is I think 6% I know mine is worth £2,800 it cannot be taken away if still promised to you when you have 3yrs left to go on the policy and they are still paying it out,if they take it away you have to be notified 3yrs prior to maturity, sorry it does take a bit of explaining hope you can understand me.

Em.
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# 17
brewerdave
Old 11-05-2011, 11:29 AM
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Originally Posted by crookedmouth View Post
I'll have to dig out my records - these policies go back so far I'm surprised I've managed to hang on to any of the paperwork!

Re misselling - I also remember being promised round the world cruises, but of course I have no evidence to back that up so a misselling claim was never an option.
THE PROMISE
NU word it so that it isn't guaranteed -its dependent on them making sufficient return on their free reserves (funds left over after meeting their committments to Policy holders) - HOWEVER, it also says that if it isn't going to be applied then they will give 3 years notice ( which they haven't).
The size of the promise is based on the maximum predicted shortfall @ 6% growth from a date in 2000 - as far as I can see I qualify.(I still have the letters from July 2000 and paperwork from even further back!!)

REATTRIBUTION
I queried this at the time ..but my policy didn't qualify as it was in the "wrong" fund. If yours was a qualifying policy you should have had loads of bumph thru' the post.

MISSELLING
I didn't have a lot of evidence ...but the bank who sold me the policy rolled over after I complained that the Bank mortgage advisor hadn't explained adequately the risks of the investment vehicles and also that they had not offered me alternative repayment methods ie straight repayment mortgage.
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# 18
crookedmouth
Old 11-05-2011, 11:42 AM
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Originally Posted by brewerdave View Post
THE PROMISE
NU word it so that it isn't guaranteed -its dependent on them making sufficient return on their free reserves (funds left over after meeting their committments to Policy holders) - HOWEVER, it also says that if it isn't going to be applied then they will give 3 years notice ( which they haven't).
The size of the promise is based on the maximum predicted shortfall @ 6% growth from a date in 2000 - as far as I can see I qualify.(I still have the letters from July 2000 and paperwork from even further back!!).
"Based on" - yeah but what does that mean? They will pay a top up of how much? The complete shortfall?

Quote:
Originally Posted by brewerdave View Post
REATTRIBUTION
I queried this at the time ..but my policy didn't qualify as it was in the "wrong" fund. If yours was a qualifying policy you should have had loads of bumph thru' the post.
I cant remember getting anything so I just phoned them up and as luck would have it, their record of my DoB differs from the one I gave them as a security question, so the couldn't discuss the matter over the phone They're sending me a letter though so I should find out soon enough...
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# 19
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Old 11-05-2011, 12:01 PM
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Originally Posted by crookedmouth View Post
"Based on" - yeah but what does that mean? They will pay a top up of how much? The complete shortfall?
Not the complete shortfall - the shortfall that they calculated that there would be in 2000 based on 6% growth from that date on the value of your fund on that date.
eg my predicted shortfall would have been ~ £3300 in 2000 but it was being predicted at £12900 last year!! I stand to get the £3300 as that is the maximum under the promise - so if I STILL HAD A MORTGAGE I would be short around ~ £9600 (less this years bonus and the terminal bonus) - glad its gone!!!

Think I just quoted the policy number to check re the reattribution windfall - I wasn't due anything
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# 20
dunstonh
Old 11-05-2011, 1:17 PM
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If you look at your 2001 statement or your 2003 (maybe 2004) statement then it will tell you the amount of your MEP.

The Aviva MEP is fully funded to the maximum. So, they dont need to find funds to pay it. They are already there. It is unlikely to be withdrawn now as the worst has gone. Aviva tend to keep quiet about it as lots of people surrender them without knowing the MEP exists. In those cases, Aviva will profit from not having to pay out the MEP.
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