Maturing endowment - no terminal bonus! Is this normal?

de1amo

i got out of a 24year policy with SL about 14 months early--i paid 40 a month and recd 18500-just as a comparison--i wasnt happy!

kingstreet

grahamngm wrote: »

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!)?

It's fair to assume that others might read this thread after searching "terminal bonus" so setting out what something is, and how it applies, is normally a good starting point even if it might appear a little obvious to the more enlightened.

As terminal bonus rates fluctuate, it is possible that a bonus could be paid on one day and nothing paid the next, although I'd suggest that's somewhat extreme. While there are policyholders within the fund, there should never be a point where there's nothing left, although I suppose if there's no liquidity and no prospect of liquidating assets to generate the terminal bonus without disadvantaging the majority of other policyholders, such a measure could be taken.

Have you had any kind of explanation from Aviva? Which fund was the policy in CU, GA or NU?

grahamngm

kingstreet wrote: »

It's fair to assume that others might read this thread after searching "terminal bonus" so setting out what something is, and how it applies, is normally a good starting point even if it might appear a little obvious to the more enlightened.

As terminal bonus rates fluctuate, it is possible that a bonus could be paid on one day and nothing paid the next, although I'd suggest that's somewhat extreme. While there are policyholders within the fund, there should never be a point where there's nothing left, although I suppose if there's no liquidity and no prospect of liquidating assets to generate the terminal bonus without disadvantaging the majority of other policyholders, such a measure could be taken.

Have you had any kind of explanation from Aviva? Which fund was the policy in CU, GA or NU?

I am not sure what you mean by fund. The policy is a traded endowment policy bought by my father to pay for his grand-childrens' education. At the time he bought it terminal bonus rates were 150% and he estimated a maturity value of £27000 on that basis. To receive £11000 is either a result of gross mismanagement or theft as far as I can see, since they appear to have managed to have made no return whatsoever since my father bought the policy AND they have lost the undeclared bonuses plus any attributable earnings from the start of the policy to the time my father bought it.

PS Thanks for taking the trouble to reply.

kingstreet

Before Aviva, Norwich Union issued its own policies and it also inherited the with profits funds of Commercial Union and General Accident, so I was wondering if anything could be gleaned from the original issuer's identity.

This is the latest bonus announcement from earlier this year;-

http://www.aviva.co.uk/adviser/product-literature/view-document.cgi?f=gn07024c.pdf

This is Aviva'a with-profits site;-

http://www.aviva.co.uk/savings-and-investments/with-profits/

Unfortunately, they aren't saying anything specific about current terminal bonuses asking policyholders to call them for current rates.

dunstonh

To receive £11000 is either a result of gross mismanagement or theft as far as I can see,

It is neither. It was a miscalculation by your father. His estimates of terminal bonus rates were no doubt based on the rates of the 60s, 70s and 80s which were much higher (due to high inflation and much better investment returns).

I was surprised how low the return was on your figures but the fact it is a TEP explains that. The price you pay for a TEP has nothing to do with Aviva. Its like buying a second hand car. You haggle the price with the seller.

grahamngm

dunstonh wrote: »

It is neither. It was a miscalculation by your father. His estimates of terminal bonus rates were no doubt based on the rates of the 60s, 70s and 80s which were much higher (due to high inflation and much better investment returns).

I was surprised how low the return was on your figures but the fact it is a TEP explains that. The price you pay for a TEP has nothing to do with Aviva. Its like buying a second hand car. You haggle the price with the seller.

Sorry, the price paid by my father has absolutely nothing to do with what we are talking about. As you say it was negotiated between purchaser and seller. The estimated maturity value was based on terminal bonus rates at the time he bought the policy (December 1999), not in previous decades.

grahamngm

'Unfortunately, they aren't saying anything specific about current terminal bonuses asking policyholders to call them for current rates.'

Surprise! Surprise!

dunstonh

Sorry, the price paid by my father has absolutely nothing to do with what we are talking about. As you say it was negotiated between purchaser and seller.

The price your father paid may have been £2000 higher than someone else buying an identical TEP through someone else. TEP prices are not cast in stone but negotiated between seller and buyer. So, the purchase price has a lot to do with the actual return received.

grahamngm

dunstonh wrote: »

The price your father paid may have been £2000 higher than someone else buying an identical TEP through someone else. TEP prices are not cast in stone but negotiated between seller and buyer. So, the purchase price has a lot to do with the actual return received.

No, it has nothing to do with the return since the return is calculated solely in relation to the premiums paid on the policy; the purchase price doesn't come into it.

ib111

Well, you like millions of others (and myself) were sold endowments to pay our mortgages, with the carrot that if they were managed well you would end up with a bonus. Maybe quite a substantial bonus based on past performance and what the life companies were paying out at that time!

I still remember the day I saw my building society manager (the old fashioned sort) who helped me choose a suitable endowment and I picked a General Accident one which was less risky, but paid a slightly lower overall final sum than some of the other endowments offered - all figures presented showed far in excess of what I would eventually receive twenty five years later and all projections paid off my mortgage handsomely.

The fact is, what was 'promised' has not materialized, there is no final bonus and yes it is now normal not to get one.

If anyone gets more than they originally expected, from when they started their endowment all those years ago, please let us all know who the life company is. I don’t expect many replies, but let’s be fair and see if there are a few companies who have done well for us customers and payers of their wages.

Quite simple, I did not receive anywhere near what I was led to expect - I'm voting with my feet. Hope I’m not trampled in the rush.