Value of with profits endowment policy

RG2015

masonic said:

RG2015 said:

I am encouraged by the link to the whole period (ie 40 years) although the final caveat gives them a get out. Could a financial melt down give them cause to apply it? As I write this I can see my aversion to risk is bordering on paranoia.  

You can perhaps reassure yourself that if things get bad enough, money might no longer have any real value, so the final value of your policy would be inconsequential.

Don’t panic, don’t panic!

We’re all doomed, doomed!

Stupid boy!

Old_Lifer

During my service with a Life Office , even when the index fell 70 percent we still paid a terminal bonus although the amount was reduced.

In a nutshell,  the surrender value you have is not a guaranteed amount.   It will have an expiry  date after which you would need to ask for another surrender value.     What is guaranteed is the sum assured and attaching annual bonuses; both of which  only become payable at maturity (or death within the term).   With the terminal bonus the rate will depend on the length of time the policy has been in force.  You are fortunate in having a policy which has been in force for 40 years so will receive a higher rate of terminal bonus than,  for instance,   someone who has a 25 year policy which is maturing.   In the event that there is some overall reduction in terminal bonus rates before your policy matures,  that differential will  be maintained and you will still receive  a higher rate of bonus than the person with a maturing 25 year policy.

RG2015

Once again many thanks @Old_Lifer,

I am indeed fortunate and it is all thanks to my NatWest bank manager saying I should get life insurance. I was 23 and asking him for a bank loan for a used Vauxhall Viva. He asked me if I had any life insurance to use as collateral (or something like that). When I said I had nothing he said he would sort out something for me.

Sun Life £10 per month although it was not linked to the loan. It is a far cry from the later bank selling activities which ended up in PPI and other financial outrages.

Perhaps he did get some commission but I am the one who has gained the most.

Old_Lifer

In case you aren't aware of it,  as you took-out the policy 40 years ago in 1980,   you would have received life assurance premium relief on your payments during most of the policy term.

Life assurance premium relief was abolished in 1884 but continued for existing  policies   until  about 5 years ago (2015 I think).  It was collected at scource by the Life Office.  This means that although the premium in your policy schedule is shown as £10,   the net premium of  less than £9   would have been collected from you each month for 35 years

Old_Lifer

Should read '1984'  .   I'm  rubbish at typing  nowadays.

RG2015

Thanks,
I initially paid £10 pcm but for the last few years has been £12.12 pcm. The policy schedule shows a monthly premium of £12.12.  It was conveniently called the Sun Life Ten Plus Plan although that referred to the initial ten years after which it could be accessed if needed.

RG2015

RG2015 said:

I have a with-profits endowment policy which matures in August after 40 years. I have a current surrender value which is significantly higher than the guaranteed sum and regular bonuses to date.

My provider says that the surrender value can fall although the bonuses tend to accelerate towards the maturity date. They also said that the policy was likely to be more property than equity based and hence better protected against equity swings. The customer services person advised that they were unable to advise the spread of my policy as it was so old.

Given the current financial crisis can anyone advise if there is a risk that the value at maturity may be significantly reduced from the current surrender value. What I can say is that the surrender value has increased by 1% in the 6 weeks since 30th January compared with the FTSE 100 which has fallen by 29% during the same period.

My policy has now matured and the final value was 2.7% lower than the surrender value quoted on 11 March. I have not seen the final calculation as yet but assume that the final bonus was reduced as a result of the Covid 19 effect on financial valuations.

With hindsight, I would have been better taking the offer in March but given the Covid situation I am not too disappointed with this outcome.