Aviva - projected shortfall anomaly

mpet

I received a Red Alert letter today from Aviva outlining the current final projections. I was a bit confused as the projected final amounts assuming a 4% or 6% investment growth were exactly the same:
Low Cost Endowment – Guaranteed minimum value on death -£100,000 – Maturity date March 2014
Assuming growth at Projected final amount
4% £78,500
6% £78,500
8% £79,700
Mortgage promise - £6,400
I’m probably being dim, but I would assume that at different growth rates, the projected final amount would be different?
I called Aviva and spoke to a very nice girl, who had no idea – she said she would get someone to look into it and get back to me, but I was wondering if I had missed something obvious that would explain this.

dunstonh

I’m probably being dim, but I would assume that at different growth rates, the projected final amount would be different?

There can be issues with illustrations on legacy plans where the example projections, which have to follow a defined method can actually calculate a lower figure than the guaranteed minimum maturity value. In these case, the guarantee minimum maturity value is used (nowadays - in the past you got some projecting lower than was actually possible).

I havent seen it on Aviva plans before but have seen it a number of times on Std Life plans. The reason is that some providers project from the current position not including any terminal/final bonus accrued to date. Some have also used projections form the surrender value and not the current value. If there is a surrender penalty, this can underestimate the likely outcome.

or it could just be an error in the illustration down to incorrect input.

mpet

Thanks Dunstonh - I thought I was missing something. Aviva are going to get back to me, so it will be interesting to hear their explanation!

All these variables do make it difficult for people to make decisions on what to do to cover the shortfall though. I'm working on the worst case scenario, then hopefully, I won't get a nasty surprise!

ruth56_2

I also got a letter from Aviva. Mine did show different projected final amounts for each percentage..my problem is that I dont know what the current percentage actually is? I thought it would be less than 4%. Have just calculated what I will have paid for this endowment policy and the projected final amount comes out at £5 more than I have paid in! Is it worth carrying on with it...we have no mortgage against it now so just benefit from the life insurance. It matures in 2018 and did not qualify for the "6% price promise as it was not showing a shortfall on 31/12/99!! now shows a shortfall of 35%. Any suggestions would be welcomed as money is tight and I cant see the point of paying the monthly premium if there is no actaul gain at all.:(

kipperkendall

I have exactly the same thing on my Aviva with profits endowment statement!

Mine matures May 2014 and all figures (4,6,8%) are identical!! Would be interested in any feedback you can give or anyone else provide.

Thanks

kipperkendall

I spoke to there customer service line, very helpful. Seems that as there is only a year or two left there percentage performance will make little difference on the projections one soothing over full term is taken into account.

Good need was that my policy is similar to yours and once final bonus is taken into account the endowment looks like it will have done ok!

If you ask the person to give a final projection based on final bonus percentage currently being achieved (32% of the red letter projected figure for mine)) you can get a reasonable gauge of final number.

Add example my protection on red letter is £44000 but with final bonus and promise it looks more like £58000!

mpet

That's very interesting kipperkendall - and it sort of makes sense. As yet, I have not had a response from Aviva. Think I'll give them another call and ask for a final projection.
I'm not overly concerned at the moment as even if the final figure is the 4% projection plus the mortgage promise, I have £10k from the FSA for mis-selling of the policy, so hopefully, I won't be more than £5k -£6k down. Still a bit of pain considering the 'promises' made when it was sold!