When do you know how much your endowment will pay out?

kennysarmy

We have an AVIVA Homemaker policy which is due to mature late August this year.
It was meant to cover an endowment only mortgage when it was taken out nearly 25 years ago, but we realised 15 years or so ago that it was unlikely to meet it's target of around £53,000. We switched part of our mortgage to repayment and only require the endowment to now cover £37,000.
I've a letter from AVIVA back in 2020 it states : "Following the re-attribution process which completed in 2009, we've been able to remove one of the fund related conditions applying to the mortgage endowment promise. This is good news and means any actual shortfall will reduce by up to £8,953 (maximum promise amount), assuming you continue to meet all the conditions set out in 'Answers to some questions you may have'"
The projection at that time showed if growth was 0.6% the final projected amount was £32.500 (shortfall £20,500)
The surrender value as at Sept 2020 was just over £34,000.

My question is, am I likely to hit the £37,000 needed and if I was to phone AVIVIA up are they able to tell me what the current likely payout will be, given there is just 5 months to go or will it only ever be calculated on the day it finishes?

Thanks.

Old_Lifer

Is the policy conventional with-profits  (with annual bonuses added) , unitised with- profits  or unit-linked (probably linked to a managed fund) ?

kennysarmy

Old_Lifer said:

Is the policy conventional with-profits  (with annual bonuses added) , unitised with- profits  or unit-linked (probably linked to a managed fund) ?

Hi, it's conventional with-profits with annual bonuses added I believe. It was originally a Commercial Union product.
I've absolutely no idea what the final bonus might be, do Aviva have to publicly state previous final bonuses?

Old_Lifer

As it is a conventional with-profits policy,  you can expect to  receive at maturity:

The endowment sum assured shown in your policy

The total annual bonuses shown on your latest annual bonus notice

A small interim bonus to cover the period from the last bonus date to the date of maturity

A terminal or final bonus which will be based on the length of time your policy has been in force

The surrender value of  £34000 you received last year probably includes the terminal bonus.   At that time your policy had been in force for 24 years so would have received a terminal bonus for a policy which had been in force for 24 years.   However, as the terminal bonus only becomes payable at the end of the term or on death within the term,   the surrender value  would include only the surrender value of the terminal bonus.     At maturity,  you will receive the terminal bonus in full  and your policy will have been in force for a year longer  so you will receive a higher rate of terminal bonus.     Of course, the terminal bonus is not guaranteed and overall rates of terminal bonus may change (up or down)  before your policy matures.      

As your policy matures in the next few months,  If you can find out the current rate of terminal bonus applicable to your policy it is quite easy to work-out  an  indication of the expected payout,  though bearing in mind the terminal bonus could possibly change between now and the maturity date.

A Life Office will usually write to you about the maturity, a month or so before the maturity date.

I cannot comment on the Mortgage Promise.  It is not within my area of knowledge.

kennysarmy

Just to update I phoned Aviva this moring.
The sum assured plus regular bonus is around £28k
The final bonus is currently 23% but this is up for review in July - ! I guess it could go down as well as up
But based on that and the "promise amount" we're looking at around £43,500 which at least covers the £37,000!