With profits fund: Throwing good money after bad

mike004

I'm 20 yrs into a 30 year With-Profits fund with Norwich Union. Payments are 50 pound a month.
The accumulated bonus so far is 8k. (There were some decent bonuses in the early years). But bonus returns are now a meagre 0.5% per annum.
So, after 30 yrs I'll probably get 26k back, for 18k of cash paid in. Pretty bad for 30 yrs. This was supposed to provide me a nest egg when I was coming up to retirement. Any deposit account would have given me better returns...

Question 1: Is it worth my while to continue paying in to this fund, throwing good money after bad? Leaving the fund would cost me about 20%, it seems.
Question 2: Did the fund managers get sacked for their incompetence, I wonder?
Thanks
Mike

Stompa

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?

mike004

Stompa wrote: »

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

I probably also contributed to the costs for the name change from Norwich Union to Aviva...
Mike

gozomark

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

Old_Slaphead

Thing is they were sold as relatively low risk and boring but turned out to be inferior pseudo-managed funds with special benefits of none transparency so that managers could allegedly use them for a host of other things ie. paying out for misselling, topping up own 'in house' pensions etc.

de1amo

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

mike004

gozomark wrote: »

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.

...

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

Yes, that doesn't sound bad.
But bonuses for the remaining 10 yrs will be zilch, or close to it. And I don't expect much of a "terminal bonus" on completing the term. In olden days, the terminal bonus could be a decent amount, I understand.
Mike

turbobob

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

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

Old_Slaphead

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)

Nosht

Keep paying, long term its worth it.
My 40 year plan paid out £112,000 for contributions of £56,000, started 1969.

Regards,

N.;)