Prudentail Terminal Bonus rates - Dropped by half in two years. Is that correct?

No. The terminal bonus reflects the difference between the actual investment return achieved and the regular bonuses already added.

They tell you it's not guaranteed.

Not sure about the way Prudential calculate their bonuses, but in my experience, terminal bonuses generally relate to the term of the policy.

Press release when the bonus rates were declared? Prudential will probably send you a copy if you ask.

The standard projection basis that insurers *have* to use says that the start point of a projection is the current transfer value, which includes the current terminal bonus.

Only in as much that it can't drop below zero. (If it does, it becomes an MVA.)

No it's set each year and can be adjusted throught the year.

Nope, if they really thought it would happen, they wouldn't have predicted it to be higher.

Again, no, the term of the policy is what is considered.

From the individual companies, I don't know of a terminal bonus comparison service, but perhaps someone else will enlighten us all.

Of course it should include it, a projection is the current value plus outstanding premiums due plus projected bonus's, your annual bonus isn't guaranteed either, but that is included.

No, they can withdraw it all if needed.

Hope this helps. Arfie

Why does the standard projection basis not say that the insurers *have* to tell you whether the terminal bonus is or is not included, do you think ? I have had the expected doom and gloom letters from Scottish Widows and have searched them high and low with a fine tooth-comb and there is not the slightest mention of the words "terminal bonus". However, it would seem obvious now that it must be included as there is no way that the figures from successive projections can tie up without some element of the policy having fallen drastically in value. I wonder how many policy holders out there are mistakenly thinking: oh it can't be that bad, there'll be some terminal bonus to make up a bit or all of the shortfall ?

Don't you mean "fine-tooth comb"? When did you last comb your teeth?

Some of us look after our teeth.

:-)

I can only speculate as I am not privy to the thinking behind the basis, but I would guess that the intention is to ignore artificial distinctions between "regular" and "terminal" bonuses. All that matters is the overall return.

If the current transfer value (including terminal bonus) is rolled up at (say) 7% pa to give a projected figure and the investment return is actually 7% then the projection will be about right. This could be achieved by regular bonuses being less than 7% and the terminal bonus being higher than it was at the beginning, or it could be achieved by regular bonuses being more than 7% and the terminal bonus being lower. It's the overall return that matters.

Probably correct. Bear in mind that the underlying investment return under many WP funds has been negative since 1999.

I suspect this is why there *isn't* a reference to terminal bonus.

A comparison of terminal bonuses in isolation is meaningless - you need to look at the overall return.

Example: Company A declares regular bonuses of 7% pa for 10 years and then gives a terminal bonus of 32%. Company B declares regular bonuses of 6% pa for 10 years and then gives a terminal bonus of 45%. The overall return in both cases is just over 10% pa.

Q1 - Terminal bonuses are set for a year, but can be modified during that year, and are for policies maturing or terminated through death during that time.

Q2 - They do not have crystal balls.

Q3 - No

Q4 - On the annual bonus declaration in the case of the Pru.

Q5 - It is not a projection, it is an indication of what will happen if the policy matures or pays out during that year.

Why do people not read what their bonus declarations say?

I was thinking exactly the opposite... it would be interesting to hear their reply though....

Not one of the annual bonus notices from SW has ever mentioned terminal bonuses, either. But that's fairly understood. (The accompanying letters usually show current values for policies of differing periods.) It needs to be far far clearer exactly what they are telling you when you get a letter saying this policy will still be 50% short even at 23% annual return, or whatever.

I'll see what they say.

So to get this right, policies of 9 years, 14 years or 24 years are quoted different terminal bonus rates.

Do they plan it so that when a policy matures it will receive 'minimal' T/bonus?

Chris.....

I do and I read my parents but the information provided is not that informative.

Chris....

Yes it should as it is a valid current bonus like the reversionary bonus, but no bonus's are guaranteed, so by the same logic, if we don't include any non guaranteed returns, projections should only show the cost of premiums, less expenses which is not a projection, just pure mathematics.

That's a feeble excuse bailed out by lazy telephone centre staff, it is due to the piss poor returns (or spectacular losses) from the stock market during the last 3 years or so, some people blame 9/11, but it was on it's arse before then.

Sorry, can't help there, Pru are best source of this information, I don't think it's relevant anyway, what good would it do you knowing how much you would have got if it hadn't gone down? It's like knowing how much you could have won on the lottery if you'd picked the right numbers. They will not offer you more if you moan that is used to be higher and the regulators will not be interested in a complaint as it is purely related to returns, which I'm afraid is just tough luck.

Arfie