Endowment

TomHughes_2

jue wrote:

That has been a great help thank you. I will write to CM I think and ask about terminal bonuses. That proberably means we won't have a shortfall at all! So therfore means its proberably unwise to go through all the channels for a claim LOL
Actually on looking at the policy again where it says special codes it says
T = the policy has a term assurance benefit in addition to the with-profits sum assured ( I thought this meant a terminal bonus,but now I'm not sure! ) Sorry for being so thick! LOL

Hi Jue, I think in most cases Terminal Bonuses are included in the maturity value projections. It wouldn't make much sense for them to warn you about a shortfall, if in fact the policy was on target.
There is one alternative that you could consider, and that is to sell the policy on the Traded Endowment market. You could potentially receive 5%-15% or possibly even more above the Surrender Value.

dunstonh

Hi Jue, I think in most cases Terminal Bonuses are included in the maturity value projections.

In some cases they are, in some they are not. This has had coverage in the financial press as well as amongst financial advisers. One of the highest profile providers was Standard Life where their 4% projections used to be lower than the guaranteed sum assured plus annual bonuses. It tends to be the older conventional with profits plans and not unitised with profits where most of the errors in projections occur.

It wouldn't make much sense for them to warn you about a shortfall, if in fact the policy was on target.

As highlighted above, there have been very many cases where projections have shown shortfalls, often significant yet 12 months later at maturity the amount paid is in surplus. There was even a thread last year where someone scanned their projection letters and the maturity letter to prove it. Although you would find most IFAs who have been around a while have clients in that position.

The reason that it often occurs is that conventional with profits plans never had an ongoing value like you expect with modern plans. The only value you could get before maturity was a surrender value. Because of the endowments issue, the providers have had to get current values for projections and the computer systems for these older plans were unable to do it. With the cost of updating the software for legacy business being prohibitive for some providers, the cheaper option was just to project from the surrender value.

You can often spot the providers that to this by looking at the lower projected growth rate and if the value is lower or equal to the sum assured plus current annual bonus accrued, then you know the projection is not going to be accurate.