Pru Endowment

jules269

My endowment is due to mature on 1 July 2020.  I’ve checked the trade in value and it is looking ok but am worried that I could see the value slashed due to the covid 19 effect on the markets.  I don’t understand what this could mean for me and am worried that I could see the value slashed just a couple of months before it is due to mature after waiting 25 years.  I would welcome any advice on how the current financial climate could affect this.  Thank you.

dunstonh

I’ve checked the trade in value and it is looking ok but am worried that I could see the value slashed due to the covid 19 effect on the markets

What type of endowments is it?  With profits or unit linked? If unit linked, what are you invested in?

I would welcome any advice on how the current financial climate could affect this. 

Markets have been recovering over the last few weeks.  If that continues, then it may not make that much difference.   However, if there is a further downturn (such as the virus returning and more lockdowns necessary) then they could fall again.   

Potentially, it could fall in that time or it could fully recover (unlikely but possible).   It would require a crystal ball to say.

Old_Lifer

If your policy  is 'with-profits'  and has guaranteed  annual bonuses  attaching,  these bonuses  and the sum assured are payable in full at maturity.   Any terminal bonus  is not guaranteed and could be reduced   but only part of a 'with-profits' fund is invested on the stock market.

If your policy is unit-linked,    you will receive at maturity   whatever is the value of the units at that date.    A unit-linked policy is often linked to a managed fund   where again,  only part is invested  in the stock market .  A unit-linked policy will often have a switch option  which  may enable the fund to be moved to a deposit fund which would lock-in gains  and would  protect against any further falls    in the stock market,   however it  would also mean  the policy would  not benefit from any recovery in the market.

jules269

I’m not sure how to reply individually 🤔thank you both for your help - I have checked my information and it is a with profits plan so I am understanding it seems bonuses would have been added throughout the life of the plan but that the terminal bonus may be lower or not added on maturity which I’m hoping still means we will get an ok return.  Thank you for taking time out of your day to reply.

Old_Lifer

Your documentation will probably say something like   'we may pay a terminal bonus when your policy matures or on death within the term'.   The rate of terminal bonus  (sometimes called a final bonus) can be altered at any time and you may not get one at all.    However,  in practice most  Life Offices  set their terminal bonus rates at the year end and apply new rates early in the following year and the same rate may be in force  for  months and sometimes for the whole of the coming year.   Just because there has been a   fall in the stock market does not mean that there may not be a recovery of sorts before your policy matures .   Nonetheless,  in view of the present situation there is  clearly a risk that rates of terminal bonus may be reduced before your policy matures.

Typically,  a Life Office will write to the policyholder 4 - 6 weeks before the maturity date   regarding the maturity of the policy.