Norwich Union increasing bonuses on some policies!!

knuckledragger

Did I read it right on teletext tonight that about 600,000 CGNU policies are actually having their bonuses increased? Is the tide turning on the endowment policy? Surely not, just a blip in the stock market making them think they are profitable again...

dunstonh

Ive noticed quite nice terminal bonus increases on plans too over the last few months.

People have been a little too focused on a short term blip because it hit financially weak insurance companies very hard. Those like NU and Pru are not going to be affected by this short term drop in the same way and a period of growth would see bonus increases again.

A unitised with profits plan would have been better off, over the long term, because of the recent drop. In the short term though, it wouldnt look as good.

knuckledragger

DD,
What sort of range are terminal bonuses coming in at?

dunstonh

Its a matter of timing on the terminal bonuses. Im seeing most improvements in the unitised with profits plans rather than the conventional. I think that trend will continue with the conventional WP plans lagging behind the unitised.

A couple of real NU examples.

£150k In January 2004 with zero terminal bonus. Now has a unit value of £159,552.89. The terminal bonus accrued as of yesterday of £4786.59. Thats on top of the 159k.

£50k in July 2004 with zero terminal bonus. Now has a unit value of £52767 with a TB on top of £1522.30

The values given by Norwich Union, over the phone, DO NOT include the terminal bonus. The website IFAs can log into does. I dont know if they will give to people if they request it.

knuckledragger

DD,
interesting stuff. I'm sitting on two NU WP plans, one unitised and one conventional. Perhaps the futures not so bleak after all.

EdInvestor

dunstonh wrote:

£50k in July 2004 with zero terminal bonus. Now has a unit value of £52767 with a TB on top of £1522.30

Hmm. Endowment up 8.6%.

FTSE100 yesterday: 5113
FTSE100 a year ago:4424

+15.5% .Add dividend of 2.75% =18.25%
Minus typical tracker charges of 0.5%

Total return:17.75%

Not that I'm a fan of them, but if you're going to take stockmarket risk, you'd have done twice as well as the endowment with a bog standard tracker over the past 12 months.:)

dibbs26

Thing is now do people who have these policy sit tight and take a gamble or get out while the going is good.............do you think their is any likely hood of regaining the loses of a few years ago..........

dunstonh

Not that I'm a fan of them, but if you're going to take stockmarket risk, you'd have done twice as well as the endowment with a bog standard tracker over the past 12 months

But over the last 5 years you wouldnt have done. With profits plans are always going to perform lower over the longer term. I havent checked recently but with profits was outperforming the FTSE over 10 years some time back. That may have reversed now but thats the problem at looking at past performance and static dates/timescales.

Thing is now do people who have these policy sit tight and take a gamble or get out while the going is good.............do you think their is any likely hood of regaining the loses of a few years ago..........

This is all down to attitude to risk and if you are with one of the, now limited number, of providers who still has good with profits potential.

If things continue as they are, then the better with profits funds will see a nice recovery and in the case of unitised with profits funds, the last 5 years would have been a good thing (conventional WP will lag behind somewhat).

There is unlikely to be a spout of bonus rate increases bringing the annual bonuses in line with savings rates. However, the gains are likely to be seen in the terminal bonus. Annual bonuses cannot be clawed back by the provider if things go bad. Terminal bonuses can. Put the two bonuses together and 6% p.a. average is certainly potentially achievable with the better WP funds.

EdInvestor

Put the two bonuses together and 6% p.a. average is certainly potentially achievable with the better WP funds.

I agree.We're probably only really talking about the Pru and Norwich Union along with a few of the small mutuals, though.

The rest of the industry is likely to be completely out of With profits within 5 years - the guarantees are now too capital intensive under the FSA's new reserving rules.

WP really doesn't work unless stockmarket returns, inflation and interest rates are high and regulation is fairly err, "lite".;) None of that is now the case.

So for most WP funds, dodo status looms.

But you can achieve the same type of investment quite easily yourself through asset allocation - and pay much lower charges as well.For most of the 80s and 90s, WP funds were invested about 60-70% in equities (basically a tracker mix), 10-15% in commercial property and the rest in cash/bonds.It's hardly rocket science to copy this split and divide your own money up in the same way, so as to adjust for your level of risk - the more risk you can accpet, the more in equities, and the more conservative you are, the more in cash/property.

A 50/50 split would probably suit many people - indeed I suspect that's what a lot of people actually thought they were getting with WP, not the 70% -or even 80% - in equities that prevailed at some life companies for many a year.......:eek: