endowment redress

has anyone come across this?

It is quite common nowadays as the stockmarket has recovered.

Endowments are not all bad. There are some good examples and unit linked endowments, in particular, have recovered quite well with the market and are getting back on track.

Endowment mortgages were, in general, cheaper each month than a repayment mortgage. That was one of the most common reasons why people did an endowment mortgage (mostly forgotten nowadays... conveniently). That difference is included in the calculation.

Projections are notoriously unreliable. On with profits plans, many do not include terminal bonuses which have already accrued. NU's doesnt include any mortgage promise as well as terminal bonus. Projections can heavily understate the position but also on worst examples can overstate the position as well.

Projections assume a straight line growth rate but in reality that does not occur. If you look at the way the mortgage is repaid on a repayment basis, you will see that little is repaid in the early years and then curves downwards until at zero. With an endoment the curve also exists and works the other way with slow to begin with (often a little quicker to build value than a repayment mortgage would be in reducing at the start) then builds more at the end.

I did a review of an endowment recently and had access to the original illustration which showed what the surrender values would be for an on track endomwent at various point. The surrender value was quite a bit higher than where the illustration said it needed to be to be on track. However, the statement projection showed it heading for a shortfall (and was amber). This is not the first time. There was a high profile case a year or two back where projections showed amber right up to a few months before maturity but the policy paid out a large surplus.

So, its easy to have an amber projection and still be in a surplus position to where you should really be at a given point in time.