Axa low cost homebuyers plan looking like it will exceed its target

fronty

In 1997 I took out an Axa low cost homebuyers plan, this was a 25 year endowment policy designed to pay out 56K which was the interest only amount on my mortgage at the time.

The policy is now run by Aviva but over the last 10 or 15 years I've been getting letters every year saying I'm at risk of a shortfall. To be honest I ignored all the miselling kerfuffle and resisted the urge to claim or to sell up early, I have already paid off a chunk of the interest only element and the policy also includes life cover and critical illness cover.

Now 24 years later, the policy is due to mature next year and I am starting to get valuations from Aviva that include a reorganisation bonus and also a terminal bonus. Up until last year they never included these figures. The terminal bonus alone is worth 25K, but they are still sending red alert warnings about a shortfall. It seems none of their projections include the terminal bonus, which seems daft. They've been warning me for years but if I cash in the policy now it will cover the original 56K that it was designed to pay out.

Compared to last years valuation, it has grown over 6K, also it has a guaranteed interest rate of 3% (which is better than any cash ISA) so I am going to keep it going for the final year as I'm curious to see how much more it will grow. Fingers crossed I will actually end up with a surplus, which I thought was unheard of for endowment policies.

Now I wonder how many people sold their policies not realising that the terminal bonus would be worth so much. 🤔

In hindsight it seems that despite all the warnings, this policy will probably meet its objectives. Does anyone else have any experience with this policy, good or bad?

dunstonh

The policy is now run by Aviva but over the last 10 or 15 years I've been getting letters every year saying I'm at risk of a shortfall.

That is in part as the projections use a much lower growth rate in the assumptions.

. Up until last year they never included these figures.
The terminal bonus alone is worth 25K, but they are still sending red alert warnings about a shortfall. It seems none of their projections include the terminal bonus, which seems daft. 

Projections don't include any terminal bonus accrued to date.  That was another reason projections were lower.

Now I wonder how many people sold their policies not realising that the terminal bonus would be worth so much. 🤔

Loads of people.    Projections are synthetic calculations assuming a linear rate of return.   You should see the mess the regulator has made with pension projections, which are just as pessimistic.

In hindsight it seems that despite all the warnings, this policy will probably meet its objectives. Does anyone else have any experience with this policy, good or bad?

You are not seeing anything unusual.

srpsrp

I've got the same plan, did you get a surplus ?

I've never figured out why they include a projection of 2% or something when as you say it's  supposedly 3% guaranteed, which I guess after a decade of low interest rates is ok

fronty

So I've just had another projection, it pays out next month, it's grown by another £3,700 despite some ups and downs in the market this year, it's currently looking like it will pay out around £60K which will give me a £4K surplus. I just checked my files and I did actually receive a red alert warning last year, despite last year's projection already showing it had met its original target.

After all the bad press there's been about endowments over the years I am actually really happy with the way mine has performed - with hindsight I think the guaranteed min. 3%pa rate made this a fantastic deal as no-one foresaw the 2008 economic crash and collapse in interest rates - when I took the endowment out interest rates were around 7.5% which probably made 3% look quite measly, but that rate has pretty much beaten the market consistently over the past 15 years.

With hindsight I wish I had taken out a bigger one, the extra money would be really handy right now!