Axa 'with profits' Policy

trumbo

I have an Axa 'With profits' 15 yr policy which I started on 26.1.1 and since reading on this forum about how bad they can be I decided to see how much mine is worth and may think about cashing it in.... I started it with £10 a month and it has gone upto £20 a month now.

Anyway I got my Surrender Value yesterday of £690.02 which includes any bonuses and a '£17 interim' bonus?

Now when I had my last bonus letter back in May sometime I think it say my total bonuses to date were £202 ish and that was the bonuses alone surely over the 5yrs the policy has run it would be worth alot more than £690?

There was no real breakdown with the surrender info.... just a figure, does this company just pick a random figure out of the air? also they are due to take another £20 this month so one would assume this would not be added to my £690.

Any ideas keep or bin?

ReportInvestor

trumbo wrote:

.... does this company just pick a random figure out of the air?....

Not a bad assessment of so-called "actuarial science" :rolleyes: .

Before cashing in, ask them to project your policy maturity value based on current charges and a 6% underlying growth in the fund. (This amount of growth is unlikely but it gives you some sort of benchmark.)

Then you can do the alternative sums with a cash ISA @ 4.5% putting in
a) the surrender value + interest to maturity
b) the monthly £20 contributions +interest to maturity.

My money's on the Cash ISA being better because of the Axa charges, even with the daylight robbery they have conducted against you to date.

Is your RIY (Reduction in Yield i.e. charges) 3.1% p.a.?

payless

Are you forgetting the value of that "free DVD" or shopping vouchers, and the comfort that it was promoted by some C class celebrity

trumbo

I think i got given £20 M&S Vouchers and I got half £60 of my first years money back...... which looking back makes it worthwhile 'NOT'


'Is your RIY (Reduction in Yield i.e. charges) 3.1% p.a.?'

Not sure where to look for that?

I am annoyed that I seemed to have been chucking money away for the last 5yrs.... There original paperwork seemed to point to the policy out performing building society accounts but I dont think that ever would have happened....

My Isa is Full so if I take the money it'll go into a high interest online savings account.

payless

I think i got given £20 M&S Vouchers and I got half £60 of my first years money back...... which looking back makes it worthwhile 'NOT'

exactly....


have a look at
http://business.timesonline.co.uk/article/0,,9063-1411839,00.html

although seems like yours was before then, ans as I assume your "purchased" off page with no advice .... ( those on here will know I have a thing about financial services products / no advice situation)

ReportInvestor

trumbo wrote:

Not sure where to look for [the reduction in yield]?

Your original paperwork -it will be included on your original projected returns.

It's a key thing to check on any financial product. More than 1.5% and you're shooting yourself in the foot.

dunstonh

It's a key thing to check on any financial product. More than 1.5% and you're shooting yourself in the foot.

I think you are leaving it tight with 1.5%. Especially if the RIY is based on TER rather than AMC and Initial charges. Most unit linked funds have charges at or around 1.5% and a 1.5% AMC would have a higher RIY than 1.5% I would go to 2.0% as a RIY but focus more on the TER.

ReportInvestor

dunstonh wrote:

I think you are leaving it tight with 1.5%.

Interesting.

It certainly makes you think about the possible advantages of a long term diversified share portfolio to mininimise charges to around 0.5% p.a.

But presumably a New Model adviser like yourself still it under 1.5% ?

I agree that the TER is the key.

Some recent comments on RIY/TER from Stephen Wynn

trumbo

Sorry but what does 'TER' mean and AMC?

ReportInvestor

TER = Total Expense Ratio.

AMC = Annual Management Charge.

The TER can significantly exceed the AMC when the managers deal too much and incur excessive dealing charges that they don't tell you about .

If so they are conning you by quoting just the AMC

Hence Stephen Wynn's concern over Portfolio turnover (churning to you and me).

The AMC can be increased by unscrupulous management tactics.

Stephen Wynn points out, and Fitzrovia confirms, that low turnover funds seem to perform better for investors .

So why the high turnover with some managers except to maximise admin charges unscrupulously & surrepticiously?

dunstonh

But presumably a New Model adviser like yourself still it under 1.5% ?

I tend to look at the TERs when picking funds. That is a more reliable indication of charges. Indeed my software allows me to filter funds and I usually go with a filter of TER less than 2.0%. Its not a hard and fast rule though as certain funds which are very good can have above 2.0% TERs. Although they tend to be specialist funds.

Even if the annual manangement charge is 1.5%p.a. that would show a 1.6-1.7% RIY over 10 years on illustrations.