Aviva Endowments - Terminal Bonus Rate

crookedmouth

I just spoke to Aviva this morning re my endowment. I thought it might be of some use to users as I've had a lot of trouble finding information on the web

My £35 per month endowment is projected to return, in 2015

at 4% ==> £9,500
at 6% ==> £10,400
at 8% ==> £11,300

against a sum assured of £6,100.

Their current final bonus rate is £235 per £1000 assured...

...which is a pretty abysmal 2.35%, compared to L&G (~70%) and Zurich (~100%).

Nevertheless some simple maths suggests that a surrender is probably not a good idea.

Can anyone confirm that the final bonus rate quoted by other companies is calculated against the sum assured rather than the final payout?

I'd be grateful for any thoughts.

dunstonh

Their current final bonus rate is £235 per £1000 assured...

...which is a pretty abysmal 2.35%, compared to L&G (~70%) and Zurich (~100%).

You cannot compare them that way.

What was the target growth rate?
What version of the endowment was it?
Was it a mortgage endowment or a savings endowment?
Which particular With Profits fund is it in?

crookedmouth

dunstonh wrote: »

You cannot compare them that way.

What was the target growth rate?
What version of the endowment was it?
Was it a mortgage endowment or a savings endowment?
Which particular With Profits fund is it in?

I had always assumed that the FB rates advertised by the various companies would be comparable, so you're pushing the limits of my understanding

The Aviva endowment is a Low Cost mortgage endowment, "participating in M1 Bonus Series 6 Endowment Bonuses". I don't know if that answers your questions.

As to my other 2 endowments (with Zurich and L&G) they were taken out to serve the same purposes (mortgage payoff) and all of them will be paying out in the next two to five years, so it would certainly be nice to make a fair comparison.

On the other hand, my entire mortgage is now repayment so the endowments are "bonuses" and the question is somewhat moot.

dunstonh

I had always assumed that the FB rates advertised by the various companies would be comparable, so you're pushing the limits of my understanding

Over the years they have offered and inherited different product types. Some of those types allowed different target growth rates and different ways of reviewing the bonuses. Often the providers will publish the headline details on their main fund but the others will be shown in less publicised documentation.

The earlier plans often only changed the final bonus once a year. The later ones could move monthly if they wanted.

Aviva also have the mortgage endowment promise and there has been the hint in the past that their bonus rates are lower because of this promise value.

The Aviva endowment is a Low Cost mortgage endowment, "participating in M1 Bonus Series 6 Endowment Bonuses". I don't know if that answers your questions.

I don't know the versions and the terms that go with them but you can see that this is not the first version with it being Series 6.

crookedmouth

dunstonh wrote: »

Over the years they have offered and inherited different product types. Some of those types allowed different target growth rates and different ways of reviewing the bonuses. Often the providers will publish the headline details on their main fund but the others will be shown in less publicised documentation.
.

After a little digging, I now understand this a bit better - you'd have thought that having held these policies for nearly a quarter of a century, I'd be a bit better clued up, wouldn't you.

My Aviva endowment final bonus is calculated against the sum assured, where as my L&G final bonus is calculated against the sum of the annual bonuses. Doing the maths, that still puts Aviva well below L&G, but not by the order of magnitude that I had originally assumed from a direct comparison of their two rates.

I'm not sure how Zurich calculate their final bonus (I'll be calling them later today).

I really have no idea of what the target growth was for any of my endowmwnts but I guess that the clue is in the shortfall warning letters which give predictions based on different growth rates

Low Int High
Z - 3% 3.75% 5%
L&G - 4% 6% 8%
Aviva - 4% 6% 8%

brewerdave

crookedmouth wrote: »

I just spoke to Aviva this morning re my endowment. I thought it might be of some use to users as I've had a lot of trouble finding information on the web



Their current final bonus rate is £235 per £1000 assured...

I have a similar Aviva low cost mortgage endowment due to mature shortly (Sept. this year) and I'm in the same fortunate position of not needing the proceeds to pay off the mortgage:).Can I be cheeky and ask a question since you have already done some research?

Is this final bonus rate against the original sum assured or against the sum assured plus previously declared bonuses??

I'm sure I asked that question some years ago of Norwich Union (now Aviva) and they told me, that when paid, the final bonus was a %ge of the new total value of the policy ie sum assured plus existing bonuses.

crookedmouth

brewerdave wrote: »

I'm sure I asked that question some years ago of Norwich Union (now Aviva) and they told me, that when paid, the final bonus was a %ge of the new total value of the policy ie sum assured plus existing bonuses.

Hi Dave - Well, I suppose it could depend on the policy, but I am pretty certain that Aviva told me it was calculated against the sum assured only. I even did some rough maths over the phone and she agreed with me.

It's worth calling them yourself to check - I was expecting the call to be long and difficult but actually they were helpful and open (gasp!). If you get a different answer to me I'd be interested to know.

I've just spoken direct to L&G and Zurich, both of whom apply the final bonus rate to the accumulated annual bonuses only.

crookedmouth

brewerdave wrote: »

I have a similar Aviva low cost mortgage endowment due to mature shortly (Sept. this year) and I'm in the same fortunate position of not needing the proceeds to pay off the mortgage:).

I know how you must feel about that! It's a nice feeling to know that there's some money coming in soon.

My first (big) endowment pays off next year and the other two in '15. My plan is to use them to cut the legs off the mortgage. There'll still be a way to go after that but I can see the light at the end of the tunnel.:beer:

dunstonh

I really have no idea of what the target growth was for any of my endowmwnts but I guess that the clue is in the shortfall warning letters which give predictions based on different growth rates

In the setting of bonuses, that doesnt really make a lot of difference. It makes a difference to how much you pay each month and how much you will get back at the end. Too many endowments used target growth rates that were fine for the 60s, 70s and 80s but were too high for the 90s and 2000s where things had moved on so much.

noxida

My policy matures november 2012, I rang them this morning and asked about the final bonus because the policy was taken out in 1987 and was formely norwich union low cost endowment the bonus at the moment is only £70 per 1000 which for me comes in at £460!just hope it doesnt go down next year.

Em.

brewerdave

noxida wrote: »

My policy matures november 2012, I rang them this morning and asked about the final bonus because the policy was taken out in 1987 and was formely norwich union low cost endowment the bonus at the moment is only £70 per 1000 which for me comes in at £460!just hope it doesnt go down next year.

Em.

God - that would be horrendous !!!Think I'll try to phone them for clarification. At least we have the shortfall promise which should yield a few extra ££s.And I don't need the proceeds to pay off the mortgage, thank the Lord!

As dunstonh says, the growth rates used for illustrations in the 80s must have been sky high - I remember glossy images of speedboats and cruise ships being used in support of the sales literature! £50 pm was going to yield 6 figure sums. Those were the days:rotfl: