Standard Life Final Bonus Question

mleonard79

EdInvestor wrote: »

Re the status of the endowment: with a conventional policy you should have a guaranteed sum assured (not the same as the amount to be paid out if you die) plus declared annual (reversionary) bonuses.

These two items added together make up the guaranteed value which is the minimum you get if you pay the premiums to maturity.

The terminal bonus is on top of that.

This is how my policy works and it's definitely a conventional WP policy. Thanks.

Regards

Michelle

mleonard79

dunstonh wrote: »

Had a standard life 3 month maturity notice about 3 weeks ago that was stating an anticipated maturity of around £28,000. It had a target of £30,000. So, looked like it was running £2k short (ignoring mortgage promise value). We logged into Standard Life and that showed the current position including final bonus or £34k.

That is what you have to be wary of when you dont include the full data.

Terminal bonuses are on the rise again. Even Pearl have been putting some on their policies and they are an awful provider

That sounds like good news :T - to be honest, though, so long as ours continues to grow at the small level it is at the moment I'l be happy. The idea was always to hold onto it as long as it's growing by more than we would save by putting it into the mortgage and it's certainly done that this year.

Regards

Michelle

EdInvestor

mleonard79 wrote: »

The idea was always to hold onto it as long as it's growing by more than we would save by putting it into the mortgage and it's certainly done that this year.

I trust you realise that the only growth that you can take for granted is the reversionary bonuses added.Any additional terminal bonus can be removed at any time, and thus there is a significant risk that growth you thought you had achieved turns out to be ephemeral.

As long as you realise that, there's no harm in taking a punt on getting back more, as opposed to less than you would have received if you had instead reduced the mortgage, though I can think of (much) better ways of doing it than using a Standard Life WP endowment. :rolleyes:

mleonard79

EdInvestor wrote: »

I trust you realise that the only growth that you can take for granted is the reversionary bonuses added.Any additional terminal bonus can be removed at any time, and thus there is a significant risk that growth you thought you had achieved turns out to be ephemeral.

Hi EdInvestor,

Yes I do realise this hence why I was a little concerned to see money (albeit a small amount) being moved from my "basic value" column, which I had assumed could not go down, into my "final bonus" column which I know is not guaranteed and can go down. That's also why I asked Dunstonh further up the thread how often these going down has been known to happen.

EdInvestor wrote: »

As long as you realise that, there's no harm in taking a punt on getting back more, as opposed to less than you would have received if you had instead reduced the mortgage, though I can think of (much) better ways of doing it than using a Standard Life WP endowment. :rolleyes:

When I looked at the policy early last year I almost decided to sell it as it looked like paying it into the mortgage would yield better results at that point. I ended up hanging on to see how the bonus payments this year went, though, and although quite a bit of the growth I have seen is in the "final bonus" so long as that doesn't go down it is giving me double what I would have saved if I had sold it. As you say, though, I am taking a punt on the fact that the final bonus won't go down when it could so it's not risk free.

As far as the better ways of doing this go, though, I'm not a financial expert so I can't see any better alternatives - if there are any fire away!! I do know this is not one of the better endowment policies out there but as far as I know I can't change the funds it has so there's not a lot I can do to improve it and, thus, the only alternative is selling it.

If I did that there are a lot of factors to take into consideration - I would need to arrange life insurance for the amount the policy provides so that's an added expense. I would also lose out on the possible endowment promise payout (now this may not amount to much but it could be up to £1860 and there's no way of knowing what it could be until it happens - I'm not sure we would get much though as I've already received an £8K+ payout for the mis-selling of the product) Also after I sold it what would I do with the £13.2K that would give me £110 p/m growth or better? I'm assuming the only thing that could do that is another investment vehicle of some kind which would also carry risks. The only risk-free things I could do would be to either pay it into the mortgage or put it into a savings account neither of which will match that return so that's why I've decided to hang onto it even although there is an element of risk involved. Thanks for the help.

Regards

Michelle

mrsmoneypenny9

is the final bonus and terminal bonus the same thing,

EdInvestor

mrsmoneypenny9 wrote: »

is the final bonus and terminal bonus the same thing,

Yes they are the same.

EdInvestor

mleonard79 wrote: »

Also after I sold it what would I do with the £13.2K that would give me £110 p/m growth or better?

Sorry, what is this 110pm growth that needs to be matched or bettered?

mleonard79

EdInvestor wrote: »

Sorry, what is this 110pm growth that needs to be matched or bettered?

Hi EdInvestor,

The £110 is an averaged out figure I have deduced from the growth of the endowment. From August 2006 to August 2007 the endowment has grown by £1,920.70 which equates to £160.05 growth per month averaged out but £609 of this is premiums so that brings it down to £109.30 per month. Of course quite a bit of this is in final bonus and, thus, is not guaranteed but I would expect there would be risk involved in any other investment product I could put the £13K into if I sold the endowment so in that case if I was going to do it I would want more than £110 p/m if you see what I mean.

Regards

Michelle

JoeK_3

mleonard79 wrote: »

Hi EdInvestor,

Yes I do realise this hence why I was a little concerned to see money (albeit a small amount) being moved from my "basic value" column, which I had assumed could not go down, into my "final bonus" column which I know is not guaranteed and can go down. That's also why I asked Dunstonh further up the thread how often these going down has been known to happen.



When I looked at the policy early last year I almost decided to sell it as it looked like paying it into the mortgage would yield better results at that point. I ended up hanging on to see how the bonus payments this year went, though, and although quite a bit of the growth I have seen is in the "final bonus" so long as that doesn't go down it is giving me double what I would have saved if I had sold it. As you say, though, I am taking a punt on the fact that the final bonus won't go down when it could so it's not risk free.

As far as the better ways of doing this go, though, I'm not a financial expert so I can't see any better alternatives - if there are any fire away!! I do know this is not one of the better endowment policies out there but as far as I know I can't change the funds it has so there's not a lot I can do to improve it and, thus, the only alternative is selling it.

If I did that there are a lot of factors to take into consideration - I would need to arrange life insurance for the amount the policy provides so that's an added expense. I would also lose out on the possible endowment promise payout (now this may not amount to much but it could be up to £1860 and there's no way of knowing what it could be until it happens - I'm not sure we would get much though as I've already received an £8K+ payout for the mis-selling of the product) Also after I sold it what would I do with the £13.2K that would give me £110 p/m growth or better? I'm assuming the only thing that could do that is another investment vehicle of some kind which would also carry risks. The only risk-free things I could do would be to either pay it into the mortgage or put it into a savings account neither of which will match that return so that's why I've decided to hang onto it even although there is an element of risk involved. Thanks for the help.

Regards

Michelle

You are astute!

Beware that you might be told to surrender or sell the policy without taking into consideration all the options that are available.

See a competent Independent Financial Adviser (IFA) who is the only person that is allowed to give advice on an endowment policy.

JoeK

EdInvestor

mleonard79 wrote: »

Hi EdInvestor,

The £110 is an averaged out figure I have deduced from the growth of the endowment. From August 2006 to August 2007 the endowment has grown by £1,920.70 which equates to £160.05 growth per month averaged out but £609 of this is premiums so that brings it down to £109.30 per month. Of course quite a bit of this is in final bonus and, thus, is not guaranteed but I would expect there would be risk involved in any other investment product I could put the £13K into if I sold the endowment so in that case if I was going to do it I would want more than £110 p/m if you see what I mean.

Regards

Michelle

Perhaps you could give a policy value figure for August 2005?The problem with extrapolating on 2006 and 2007 figures is that there was a one off boost to the TB last year using money raised at the demutualisation, and they have repeated this one-off approach to a lesser extent this year.

This means they are leaving nothing in the kitty for smoothing in the case of bad years - they would rather have to take this extra money away.The rises also don't reflect real underlying investment returns as would be the case in a proper unit trust and thus you can;t rely oin similar returns in the future.

By all means stick with it, but don't assume any of this money is actually yours or that these returns will necessarily continue. Just like in 2002-2006 this policy value could easily evaporate again.