Endowment Bonus query

amd

I've just been checking my endowment policy 'Annual Bonus' declarations (wondering if I'm too late to complain about mis-selling - it's so confusing!).

Anyway, I've a policy with Scottish Life (now a division of Royal London since 2002-ish), and I've noticed that my 'New Declared Bonus' has dropped dramatically from around £125 at end of 2001, to £36 in 2002, £18 in 2003 and £18 at the end of 2004.

Considering they have always been above £125 and closer to £200 on average I'm wondering if this is something I should be worried about - seems like it to me. I find the whole endowment thing totally confusing!!

Should mention the endowment was taken out in 1988 for £15,000 over 25 years.

I'd be really grateful for any help decyphering these statements...

EdInvestor

Hello amd

The reduction in bonuses is probably because the old ScotLife WP fund is now invested mainly in bonds (not equities) - and perhaps closed to new business(?) after the demutualisation. This may mean it's not going to produce much in the way of returns in future and would be best surrendered.

But post some more info on the endowment so we can take a look.

Guaranteed sum assured
Total bonuses
Surrender value
Monthly premium
Maturity date

The Which site - https://www.endowmentaction.co.uk - is helpful on misselling and the grounds for complaint.

dunstonh

When in 1988 did you start the plan?

A closed fund does not necessarily mean bad performance. Some of the closed funds are doing very well.

amd, you have to remember that we had a major stockmarket crash a few years back and we are still recovering from that. Due to the way your investment works, there are some guarantees built in and the overall fund (behind the scenes) would have dropped by more than the value of the plans. So, returns in the "recovery" years will be lower as they have to catch up to where they were before the crash before they can start paying higher bonuses again. Some of the better with profits funds are now catching up and increasing bonuses again. Whilst some of the poorer with profits funds will potentially take 20-30 years to catch up on their current investment spread.
This means the good ones shouldnt be a problem over the long term whereas the worst ones may never pay a bonus again.

Scot Life still offer with profits. However, yours is most likely the with profits I fund whereas the current WP fund is With Profits III. The WP I bonus rate is currently 0.5% with a Terminal Bonus rate up to 42%. The previous year was 0.5% and upto 35% and year before that it was 1.0% and upto 31%. Before that it was 3.0% and upto 26.25% The trend at Scot Life, like many other providers, is to keep the annual bonus low but increase the terminal bonus. This gives them more financial security than increasing annual bonuses.

amd

Thanks guys for quick replies.

Started on 1/9/1988
Maturity Date 1/9/2013

Basic Benefit £4,864
Total Bonuses decl £2,516
Basic + Total Bonuses £7,380

Min Death Benefit £15,200

Monthly £21.87 (low start policy started at £10.97/month, increased by £2.18 each year from '89 to '93!!! - how skint I was then to agree to this :rolleyes: )

Agree (from Scottish Life website) it's the 'WP 1' with terminal bonus of 42%. Does that mean low annual bonuses from now on perhaps, with a bonus of 42%-ish of the £7,380 figure added on - ie taking me to around £10,500?
Is that how the terminal bonus is calculated?
Is there any good reason to keep this policy going?

No idea of surrender value as I hadn't even given that a thought until now! Looks like I'm just paying for the life cover! This is only 1 of 3 policies we have - one of which dates from 1999 sold to us by my brother in law to top up the old ones we had when we moved up to our current house! May get in touch with you to check those figures when I have time.

Having a bit of a panic now - a million thanks for your help.

EdInvestor

AMD

Can't really give a view until you get the surrender value, so will wait.