AVIVA - Reduced endowment payout

raddy59

Aviva Endowment matured 15.1.12 (way below what was initially forecast - but never mind)

estimated payout in letter on 3.1.12 £29,000
amount paid out to bank 19.1.12 £28,000

Anybody else had similar?
Anybody complain?
Anybody get a result?

Wh05apk

Complain about what?

The £29,000 was "ESTIMATED" as you say, so that's all it was.

raddy59

Mortgage adviser

estimated payout in letter on 3.1.12 £29,000
actual payment 15.1.12 £28, 000

So in what, 12 days, the estimate is revised down by over 3%.
- small beer to Aviva (and mortgage advisers obviously)
- rather larger to the scammed little guy who was told by a "mortgage advisor" that the payout would exceed the £44,000 mortgage a "conservatively estimated " £20.000

mortgage adviser - please tell me where I can plug into that kind of return?

It's like the final insult sneak picking out of the honey pot whilst they still have it.

(I'm surprised said advisers and endowment companies haven't been put up against a wall and....well you know where it's going)

One final point - despite maturing on 15.1.12, and all documents in place it takes an additional 10 days to make the payment - a slice of largesse reserved only for the financials when they have to pay

dunstonh

estimated payout in letter on 3.1.12 £29,000
amount paid out to bank 19.1.12 £28,000

estimate assumes FSA standard growth rates. Actual will be actual investment returns (plus or minus) in the period. So, getting more or less is quite normal.

Anybody complain?

FSA do not allow complaints about investment returns as they are always unknown.

So in what, 12 days, the estimate is revised down by over 3%.

Sounds right given returns on that fund over that period.

(I'm surprised said advisers and endowment companies haven't been put up against a wall and....well you know where it's going)

Your foul comments to Wh05apk are disgraceful. He has done nothing to harm you but you react with bile. It tells us a lot about your personality. Scum bag comes to mind.

ib111

This whole thread summed up a lot for me.

I will never invest in an endowment again.

Endowments were sold at time I took out my mortgage on the basis that they would pay off the mortgage and may make a bit of extra money. Thats what my friendly building society manager led me to believe in 1987 anyway.

The overall cost of a repayment mortgage compared to the endowment option was similar, so I choose an endowment hoping for a 'bit of extra money' at the end of the term.

Raddy, your complaining that the final amount went down £1000 in the last month, I think you should consider the £16,000 it went down from the £44,000 that you were expecting to receive to pay off your mortgage!

Aviva are generally paying out just under 2/3 of what they were 'expecting' to when they sold these policies all those years ago. They calculated the cost of your monthly premiums to pay out £44,000, but are now only paying you £28,000. If they call themselves experts at financial planning perhaps they would not be an appalling £16,000 short! My theory is then - with a repayment mortgage you would now have paid off the £44,000. With an endowment you got £28,000. Both would have cost about the same over the term of your mortgage. I therefore conclude Aviva has lost, spent, pocketed or gambled away £16,000.

So Aviva where is Raddys £16,000?

On a personal note - Aviva not once in any of your letters to me regarding my endowment have you said sorry for your poor performance! Your shareholders do not seem to have shared the pain yet, that us, your customers have. Have any Aviva customers had an apology?

My advice is never ever use Financial or Mortgage advisors, they just take out their fees/commission for products you can mostly get on the web these days, often at better rates. As we can see, if the big institutions can't get it right, how can these people justify recommending their products and charging you for the privilege?

Basically if you want to invest your money just look on the Web at some of the free more honest sites (such as this one) and make up your own mind up as to deals available and consider the risks and returns yourself.

COLOURBOUNCE

I really don't get this. The estimate assumes FSA standard growth rates, yet the payout is due within two weeks. They must surely have some hard figures, after 25 years, not to have to assume any longer. I cannot think of another industry that is allowed to behave the way the financial sector do. The regulation must be primary school soft, that's all I can think. I'm off to pin the tail on the Donkey.

jamesmorgan

ib111 wrote: »

This whole thread summed up a lot for me.

I will never invest in an endowment again.

Endowments get a lot of flack - and certainly in terms of transparency, some of this is deserved. However, I am less convinced that this is as well deserved in terms of investment returns. I have had two endowments. One, with Guardian, matured this month and generated £16K profit. The other, with Standard Life, is due to mature in 2 years time and is projected to generate £10K loss. On the surface, the Guardian policy seems to have been a much better policy. However, if I calculate the annual return on my investment into each policy (after taking off life insurance payments) both have delivered between 4-5%. Clearly I was paying a lot more each month into the Guardian policy.

When you take out an endowment you are making a simple bet that investment returns will exceed mortgage interest rates. If they do, you are likely to make a profit. If you don't, then you make a loss. Some endowments (such as my SL policy) used quite aggressive assumptions about likely investment returns and as such had low monthly payments. However, it is usually made fairly clear to the buyer what investment returns are assumed. If they are uncomfortable with these assumptions they should go with a repayment mortgage, or make further savings into other investment plans.

That said, if I was starting again I also wouldn't invest in an endowment. Having now understood financial markets much better I would probably place my investments in a low cost FTSE tracker. Over the past 25 years the FTSE100 has had an annual growth rate of 5.5% (and that excludes dividends).

dunstonh

I will never invest in an endowment again.

Its been nearly a decade since this obsolete product was available in the mainstream.

Endowments were sold at time I took out my mortgage on the basis that they would pay off the mortgage and may make a bit of extra money. Thats what my friendly building society manager led me to believe in 1987 anyway.

And at that point, no endowment had ever failed to hit target and pay a large surplus. Which? (consumers association) was still recommending them. The media was still recommending them. It was quite normal to see them recommended everywhere.

The overall cost of a repayment mortgage compared to the endowment option was similar, so I choose an endowment hoping for a 'bit of extra money' at the end of the term.

Normally endowments were a little cheaper. Typically around £10-£20 pm although it did depend on the interest rates. That was a very common reason why many went with the endowment option as it was cheaper.

On a personal note - Aviva not once in any of your letters to me regarding my endowment have you said sorry for your poor performance!

Why? Have you said sorry to them? They have little control over the returns and issues that occurred. Just as you didnt.

My advice is never ever use Financial or Mortgage advisors, they just take out their fees/commission for products you can mostly get on the web these days, often at better rates. As we can see, if the big institutions can't get it right, how can these people justify recommending their products and charging you for the privilege?

How short sighted of you. Had this site existed in 1987 or any of the quote comparison sites then they would be recommending endowments and you would be buying them with far less consumer protection.

I really don't get this. The estimate assumes FSA standard growth rates, yet the payout is due within two weeks. They must surely have some hard figures, after 25 years, not to have to assume any longer. I cannot think of another industry that is allowed to behave the way the financial sector do. The regulation must be primary school soft, that's all I can think. I'm off to pin the tail on the Donkey.

They have to use fixed figures. They cannot make the figures up. The problem was that the markets fell and the value dropped. They could easily have gone up by more than the projections as well had there been a growth period above that seen on the projections. Investments zig zag in value and the timing of a zig or a zag can be unfortunate for some people whilst benefitting others. e.g. a drop just before maturity can be damaging like you have seen. A drop for those paying monthly for another 3 years plus can be very useful and improve returns for the long term.

That said, if I was starting again I also wouldn't invest in an endowment. Having now understood financial markets much better I would probably place my investments in a low cost FTSE tracker. Over the past 25 years the FTSE100 has had an annual growth rate of 5.5% (and that excludes dividends).

You are right. Endowments are obsolete and modern alternatives better. However, if you checked the cost of trackers 25 years ago then they are nothing like today. Plus, the returns of a bog standard average balanced managed fund (which is lower risk) are not dissimilar to the UK equity fund (and investing 100% in one sector is bad investing).
Going back to 1989 (when the sectors were created and data became available), if you paid £100pm into the average (so mid table) balanced managed fund and the same into a tracker then you would have got £58005 on the tracker and £51635 on the balanced fund. Yes the tracker is currently higher but the position was reversed just a few years ago. Short term volatility still seems them close right up at times.

Also, for the benefit of those that dont understand how it could drop in the short term, that £58005 value as of yesterdays prices would have been £61,820 on 30th April 2011 but £52,921 on 30th Sept 11. Last year was a negative year on the markets and you can see how short term volatility hits the value in both directions.

jamesmorgan

dunstonh wrote: »

You are right. Endowments are obsolete and modern alternatives better. However, if you checked the cost of trackers 25 years ago then they are nothing like today. Plus, the returns of a bog standard average balanced managed fund (which is lower risk) are not dissimilar to the UK equity fund (and investing 100% in one sector is bad investing).
Going back to 1989 (when the sectors were created and data became available), if you paid £100pm into the average (so mid table) balanced managed fund and the same into a tracker then you would have got £58005 on the tracker and £51635 on the balanced fund. Yes the tracker is currently higher but the position was reversed just a few years ago. Short term volatility still seems them close right up at times.

Also, for the benefit of those that dont understand how it could drop in the short term, that £58005 value as of yesterdays prices would have been £61,820 on 30th April 2011 but £52,921 on 30th Sept 11. Last year was a negative year on the markets and you can see how short term volatility hits the value in both directions.

It is a personal opinion, but for me the key criteria for long-term investment returns is charges. I would simply go with the lowest charges in the asset class that I am interested in. I have little confidence that the additional charges for a managed fund would generate higher returns.

I agree with your comments about volatility and I would expect to gradually move funds into fixed interest as a policy nears maturity. This is routinely done for pension funds, so am a bit surprised that it is not done for endowments.

dunstonh

It is a personal opinion, but for me the key criteria for long-term investment returns is charges. I would simply go with the lowest charges in the asset class that I am interested in.

Cost is the second driver for me. Investment potential is the primary one. I wont go in cheap rubbish but then I wont go in expensive rubbish either. I tend to use a more core and satellite approach which typically sees me use trackers in most mature markets or where I want standard exposure to the market. However, I will use managed funds in areas where trackers are weak or non-existent (such as property, corp bonds and emerging markets or more focused parts of the market - although I have used the odd trackers in some of those at times). On non-serviced portfolios, I either use a portfolio fund or a collection of only trackers. I don't believe in either option being best for everyone. I think you should take the best of both. Investing is all about opinion though

I agree with your comments about volatility and I would expect to gradually move funds into fixed interest as a policy nears maturity. This is routinely done for pension funds, so am a bit surprised that it is not done for endowments.

Life-styling (as it is known) became an option on retail pensions after 2001. The last mainstream endowment provider withdrew in 2003 but most had already gone by then. So, the only way risk reduction would take place on these old contracts is if you did it yourself or you employed an IFA to do it for you. Also, many of these endowments often only had one fund.

COLOURBOUNCE

Quote;
I would expect to gradually move funds into fixed interest as a policy nears maturity. This is routinely done for pension funds, so am a bit surprised that it is not done for endowments.

And so the estimate would have made some kind of sense. If they don't move out of market, the estimate isn't worth sending in the first place? Incidently, I don't recall a market crash of 3.5% in January. However it's dressed, these examples just reinforce the public perception that the industry is loaded against the investor.