Aviva endowment moan

ukcarper

Just got the final value on my Aviva endowment, which is £15k, including promise of £2.3k it was supposed to cover £20k mortgage. I know that we have just gone thought the crash but what I find annoying is that even though there has been a recovery over the last year or so, the final bonus has reduced from £2150 this time last year to £500. So Aviva policy holder be aware.

dunstonh

but what I find annoying is that even though there has been a recovery over the last year or so, the final bonus has reduced from £2150 this time last year to £500.

Thats because the lag with the With Profits fund will see last years gains come into play this year and next year. With Profits funds are slower to go down and slower to go up.

ukcarper

dunstonh wrote: »

Thats because the lag with the With Profits fund will see last years gains come into play this year and next year. With Profits funds are slower to go down and slower to go up.

I'm sure that is suppose to be the case but what about the smoothing and the fact that even though the fund increased last year they still cut a lot of endowment final bonuses at the begging of the year even though they cut the final bonus by 50% last July and why did they take the bonus table of the web site.

dunstonh

ukcarper wrote: »

I'm sure that is suppose to be the case but what about the smoothing and the fact that even though the fund increased last year they still cut a lot of endowment final bonuses at the begging of the year even though they cut the final bonus by 50% last July and why did they take the bonus table of the web site.

The smoothing side still works to some degree but not as much as it used to. With financial solvency requirements higher the annual bonuses have fallen away and been replaced more going into the final bonus. The final bonus is volatile as that will generally follow the markets more. So, in effect, many with profits funds tend to track closer to the balanced managed fund or cautious managed fund (depending on their equity backed ratio). Avivas tends to match their Balanced Managed fund more often than not.

Not trying to justify anything. Just highlight the cause and effect.

ukcarper

I just think with two cuts one in Jan and one in July last year another cut was not necessary this year considering their fund grew .

dunstonh

ukcarper wrote: »

I just think with two cuts one in Jan and one in July last year another cut was not necessary this year considering their fund grew .

The MVRs got reduce/removed mostly though. Remember that the scale of the decline was greater than most final bonuses could cater for. So, they have to catch that up. The annual bonus rates are pretty much irrelevant nowadays. If they had their way they would set them to zero and put the whole lot on final bonus. Indeed, some insurance companies already do that.