Endowment matured...just my luck...
Discussion
Pay in for 25 years, and the damn thing matures in the middle of the Covid-19 situation. The thing is, the estimated maturity value, six weeks ago, is 7% higher than what's actually been paid out. I appreciate that these amounts aren't guaranteed, and there will be movement between the estimated figure and the final figure, but 7%, in six weeks ? Apparently due to a variation in the final bonus. My question then - am I unreasonable to expect the provider (Aviva) to safeguard this estimated maturity value, or am I at the mercy of the dark art of their final bonus calculation ? Oh - being used as a savings vehicle (or so I thought) rather than to pay off the mortgage.
That was my thinking. Just sitting down and researching further, it seems there is a statement from Aviva announcing the Final Bonus rate are to be reduced, dated 6 May. I've not been sent a copy of this - it was issued three weeks after they wrote with my estimated maturity value (on 19 April), but states the reductions were being implemented from 1 April. Just seems a bit disingenuous given this final bonus rate reduction would have a material impact on the estimated value they quoted - an estimated value they knew full well wouldn't be anywhere close to the final amount. Of course, both figures are well short of the Target Amount....
Without knowing policy details (I am not asking for any for the avoidance of doubt), the investment mix of the with profits fund and the exact approach used by Aviva for final bonus setting no one can say if it is a reasonable change or not. However, at a very high level it does not seem unreasonable given recent market volatility.
Final bonus rates for conventional with profits endowments are normally reviewed at least once a year with the aim to pay out the asset share (the asset share is the underlying value of the policy which is premiums less expenses/charges applicable plus investment return)
In times of volatile markets the final bonus rates can be reviewed more frequently (i.e. monthly). Final bonuses can be set by pooling similar policies. For example, 30 year endowments are grouped together, 25 year endowments are grouped together etc.
The final bonus rates are then calculated based on the asset share divided by the sum assured plus annual bonuses added to the policy. This approach pools risks and smooths bonuses across policies.
If markets had increased by as much as they had fallen then they may also have increased the final bonus rates.
Final bonus rates for conventional with profits endowments are normally reviewed at least once a year with the aim to pay out the asset share (the asset share is the underlying value of the policy which is premiums less expenses/charges applicable plus investment return)
In times of volatile markets the final bonus rates can be reviewed more frequently (i.e. monthly). Final bonuses can be set by pooling similar policies. For example, 30 year endowments are grouped together, 25 year endowments are grouped together etc.
The final bonus rates are then calculated based on the asset share divided by the sum assured plus annual bonuses added to the policy. This approach pools risks and smooths bonuses across policies.
If markets had increased by as much as they had fallen then they may also have increased the final bonus rates.
snabzter said:
Without knowing policy details (I am not asking for any for the avoidance of doubt), the investment mix of the with profits fund and the exact approach used by Aviva for final bonus setting no one can say if it is a reasonable change or not. However, at a very high level it does not seem unreasonable given recent market volatility.
Final bonus rates for conventional with profits endowments are normally reviewed at least once a year with the aim to pay out the asset share (the asset share is the underlying value of the policy which is premiums less expenses/charges applicable plus investment return)
In times of volatile markets the final bonus rates can be reviewed more frequently (i.e. monthly). Final bonuses can be set by pooling similar policies. For example, 30 year endowments are grouped together, 25 year endowments are grouped together etc.
The final bonus rates are then calculated based on the asset share divided by the sum assured plus annual bonuses added to the policy. This approach pools risks and smooths bonuses across policies.
If markets had increased by as much as they had fallen then they may also have increased the final bonus rates.
Thanks Snabzter - I get the point about reviewing bonus rates and the grouping of polices to smooth the impact (both positive and negative) across policies, it just seems tad unfair to have quoted me a maturity value when they had already started applying final bonus reductions. Given I was so close to the maturity date it would have been better to take my policy out of the market rather than quote me a figure knowing with absolute certainty that it would not be a value the policy would be paying out.Final bonus rates for conventional with profits endowments are normally reviewed at least once a year with the aim to pay out the asset share (the asset share is the underlying value of the policy which is premiums less expenses/charges applicable plus investment return)
In times of volatile markets the final bonus rates can be reviewed more frequently (i.e. monthly). Final bonuses can be set by pooling similar policies. For example, 30 year endowments are grouped together, 25 year endowments are grouped together etc.
The final bonus rates are then calculated based on the asset share divided by the sum assured plus annual bonuses added to the policy. This approach pools risks and smooths bonuses across policies.
If markets had increased by as much as they had fallen then they may also have increased the final bonus rates.
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