Endowment - poor performance

TrickyDicky101

Broadly speaking, the terminal bonus is calculated from your 'asset share' of the With Profit fund less your basic sum assured and accrued annual bonuses to date.

Thus the terminal bonus is heavily reliant on the value of the underlying assets within the WP fund at the point of terminal bonus calculation - if the fund is significantly invested in equities, the level of the stock market at that time will likely influence the eventual payout.

There should therefore be no exponential increase towards maturity unless stock markets are going thru the roof at the time.

dunstonh

The FCA are indeed in the process of a far reaching investigation concerning these type of investments and it has been on going for about 12 months now.

It isnt really what they are looking at though. They are looking more at terms of exit and penalty charges. Investment returns are not part of the investigation (probably as most WP funds invest in low risk assets with low returns because of the FCA).

egards the terminal bonus which i have in the make up of the policy (which has no penalties) does anyone no how these are calculated? Does the value of the terminal bonus increase exponentially nearer the end of the policy?

Think of the underlying fund value and your value as two different things. Your value is flat bar the addition of annual bonuses. However, the underlying fund value will zig zag. At times your value will be lower than the underlying value and the final bonus will likely go up. At other times your value will be higher than the underlying value and the final bonus will go down. So, the running final bonus tends to reflect more the market performance at that time in relation to the difference between your guaranteed value and the underlying fund.