Standard Life,loanback,projections - DFW

dunstonh

The current final bonus is not guaranteed. However, early surrender will see a reduction in the guaranteed sum assured and probably a penalty applied as well. You need to cost up the current position including terminal bonus (and mortgage promise value if applic) against the surrender value as that is what you are losing if you surrender at this point in time.

Whilst I agree with you in agreeing with the first paragraph of Ricardoro's post, I'm sure you didn't mean to agree with the second paragraph.

I didnt agree with that bit. Ed is mispresenting that data and confusing people with it.

EdInvestor

http://www.thisismoney.co.uk/saving-and-banking/article.html?in_article_id=422947&in_page_id=7

dunstonh

EdInvestor wrote: »

http://www.thisismoney.co.uk/saving-and-banking/article.html?in_article_id=422947&in_page_id=7

regurgitating rubbish article. Only the British media can present good news as bad.

How they can present increasing bonuses and shortfalls getting less (or going into surplus) as returns going down is beyond belief.

EdInvestor

We are trying to look forward: so the boost to returns this year from the inherited estate are a one-off and can't be counted. You have to remember that Standard has hardly any free assets left any more after losing 8bn of them in the market crash in 2001-03, thus it has virtually nothing in the kitty for smoothing in bad years ( indeed arguably it should not be distributing this money at all,but rather building up the reserves to replace the previous losses.)

What happens if the present market volatility turns into a crash?Don't forget that the bond market has made losses this year and property is likely to be flat at best.If stockmarkets went the same way the effect would be to wipe out this boost to the TB - and any other recent rises - overnight.

Dunstonh appears to have a very short memory when he talks about these rises.Those with longer ones will be aware that as recently as 2002, the terminal bonus on an average endowment over 10 years old would have been the same size as the guaranted value. These days, you're lucky if it adds an extra 10% - as much as 40-50% of policy value has been lost, and the decline is still going on when you discount one-off payments.

It's very easy to see that it wouldn't take much to wipe out the TBs again.
Why would you take the risk when you can earn much the same returns quite safely by either cashing in and paying off the mortgage or even putting the money in a high interest account?

dunstonh

Dunstonh appears to have a very short memory when he talks about these rises.Those with longer ones will be aware that as recently as 2002, the terminal bonus on an average endowment over 10 years old would have been the same size as the guaranted value. These days, you're lucky if it adds an extra 10% - as much as 40-50% of policy value has been lost, and the decline is still going on when you discount one-off payments.

2002 has happened. Nothing we do today can influence that. We can only look forward.

It's very easy to see that it wouldn't take much to wipe out the TBs again.

Unlikely but possible. The last crash was the largest since the 70s and largely caused by a bubble. We are not in a bubble position at this time (china perhaps but that will not factor high on most providers with profits funds).

Why would you take the risk when you can earn much the same returns quite safely by either cashing in and paying off the mortgage or even putting the money in a high interest account?

Because the cost of surrender and what you lose can be far higher than the terminal bonus alone. Its only the terminal bonus that is at risk of being removed. It is also at risk of doubling or trebling.