Maturing endowment - no terminal bonus! Is this normal?

grahamngm

Hi,

I have an endowment policy with Aviva maturing in May. It is a 21 year policy paying £40/month. This means that the total premiums paid will be £10,000. Aviva have told me that there will be NO terminal bonus and that the maturity value will be about £11,500. This means that we will be getting back less than the premiums we have paid adjusted for inflation. Any comments? Is this reasonable?

Thrugelmir

What bearing does inflation have on the investment return?

grahamngm

'What bearing does inflation have on the investment return?'

It means you get less of a real return?

Annisele

I'm not sure what you mean by "is this reasonable".

If you're asking "did my policy perform well" - no, not particularly. If you're asking "is it possible for me to get back less than the rate of inflation" - yes, quite easily. There's no guarantee that investment returns will beat inflation. With an endowment, you're also paying for life cover - which reduces the return you get on your premiums.

dunstonh

Is your policy unit linked or With Profits?

Is this reasonable?

Yes. You suffered the affects of having two significant market crashes in the last 10 years following a period where there was virtually no crashes. Bad timing and very unusual. It's about the closest you can get to a perfect storm for regular investing. Indeed, the 2000s were the worst performing decade for generations.

shop-to-drop

Can I ask how you know what the terminal bonus will be? I also have an endowment ending on May 1st can I find out the terminal bonus now? Mine is with CIS.

maninthestreet

You would have been better off paying the £40 per month into a BS Savings Account.

Dasa

Im not sure why you are asking this question.

All companies offering endowments have different funds and performance differs widely.Also a proportion of the premium goes towards the life cover element.

If you are asking if the investment has performed badly then I would say yes, as I pay less than this into mine and mine is due to mature next year at 50% more than the figure you quote.(But even then it would depend on factors such as age and health when policy was first taken out)

kingstreet

Terminal bonus is the surplus in a with-profit fund which has been retained to smooth out investment ups and downs during the policy term. This is a non-guaranteed one-off lump sum which can be added to the maturity or surrender value of a with-profit policy.

If you have not received a terminal bonus it could be because;-

- you do not have a with-profit policy (does it mention "units"?)

- there is no surplus profit in the fund to pay a terminal bonus.

grahamngm

shop-to-drop wrote: »

Can I ask how you know what the terminal bonus will be? I also have an endowment ending on May 1st can I find out the terminal bonus now? Mine is with CIS.

Just phone them up and ask for an estimated maturity value.

grahamngm

kingstreet wrote: »

Terminal bonus is the surplus in a with-profit fund which has been retained to smooth out investment ups and downs during the policy term. This is a non-guaranteed one-off lump sum which can be added to the maturity or surrender value of a with-profit policy.

If you have not received a terminal bonus it could be because;-

- you do not have a with-profit policy (does it mention "units"?)

- there is no surplus profit in the fund to pay a terminal bonus.

Thanks. Rather obvious statements. The question is that given that they never declare as annual bonus all that is earned, what has happened to the part they did not declare as annual bonuses over 21 years and presumably re-invested every year? Have they blown the lot? Paid it out to others (sounds fair!)?