Is an Aviva Bond Terminal Bonus payable? 23 February at 11:47AM in Savings & investments 3 replies 104 views

riceandmotors

My father has a Aviva with profits bond that he is thinking of cashing in later in the year. On his statement part of the value is a "with profit terminal bonus", is this payable to him if he cashes the investment in?

With the wording "terminal bonus" I wasn't sure if this meant this bonus would only be payable on death? It's not a life insurance policy though, it's an investment bond which has really confused us.

Is a terminal bonus payable if the bond is cashed in?

dunstonh

My father has a Aviva with profits bond that he is thinking of cashing in later in the year. On his statement part of the value is a "with profit terminal bonus", is this payable to him if he cashes the investment in?

The terminal bonus accrues over the term of the policy but it can change daily.    So, whatever the value of the bonus is on the day of surrender is what he will get.

With the wording "terminal bonus" I wasn't sure if this meant this bonus would only be payable on death? It's not a life insurance policy though, it's an investment bond which has really confused us.

It is a life assurance.    It will be a single premium whole of life assurance policy.   The use of the word "terminal bonus" indicates it is an old fashioned plan.   Most (if not all) of the Aviva legacy companies had moved to unitised with profits over 25 years ago and the wording was final bonus on those funds.

Before he surrenders the plan, he should check for tax liability.  Surrenders create a chargeable event for tax purposes.  It doesnt mean there will be tax but it could do.

VXman

To have a terminal bonus is quite a normal thing on a with profits policy (not sure about the use of the word  'bond' though?)

Usually they can be a considerable percentage of the final pay-out. My wife just cashed in her Prudential policy. It was valued at £130,000 but the terminal bonus brought it up to £179,000.

dunstonh

To have a terminal bonus is quite a normal thing on a with profits policy (not sure about the use of the word  'bond' though?)

Whilst their generic name is single premium, non-qualifiying, whole of life assurance, they were retailed as onshore investment bonds (offshore investment bonds exist as well but that would be "insurance company name international" if it was one of those).

Usually they can be a considerable percentage of the final pay-out. My wife just cashed in her Prudential policy. It was valued at £130,000 but the terminal bonus brought it up to £179,000.

Did she do a chargeable gains calculation before doing it?   A lot of people don't realise that these policies are not tax free.