Endowment insurance final bonus

Lenski_2 · 29 October 2009 at 6:57PM

We have a conventional 25 year with profits endowment plan that matures at end of Nov 09, Prudential are the insurer. All the way through the policy life we have received "green" letters explaining the plan is on track to pay out the target amount (£20k), even as recently as Sep 08 Prudential told us we were on track. In August 09 we received a letter forecasting doom and gloom of the past twelve months but lauding how careful the company are consistantly providing strong performance etc.
Prudential have recently provided a final valuation £410 below the target amount, and explained final bonuses are not guaranteed and can go up and down. Additionally the company can choose the amount of the final bonus. What I dont get is, if the policy has been on track to pay out the target amount for 24 years, how is it over the policies final year its bonus reduces to below the target amount?!
Any advice how I word a complaint, and will it make any difference?

Let_Us_See · 29 October 2009 at 7:09PM

Personally, I would celebrate only a £410 endowment shortfall and thousands of policy holders would gladly swop places with you. Bring on the dancing girls.

Seriously, all investments are a risk their value can rise and fall, and performance of investments funds have been disappointing over the last 24 months. Sure not a perfect result, but not end of world either - I hope!

opinions4u · 29 October 2009 at 7:22PM

Lenski wrote: »

What I dont get is, if the policy has been on track to pay out the target amount for 24 years, how is it over the policies final year its bonus reduces to below the target amount?!

Google "Credit Crunch and investment returns".

It might explain why Robert Peston was on the news a lot over the last year or so.

Any advice how I word a complaint, and will it make any difference?

Don't waste your time. It won't make any difference.

I am amazed that you didn't think the main news story for the last couple of years wouldn't impact your policy in some way.

Prudential are just about the top performer for endowment returns for policies taken out 25 years ago. You have been extremely lucky to have invested with them. Others in your position are seeing shortfalls in excess of £10,000.

SailorSam · 29 October 2009 at 7:29PM

Several years back when there was lots in the news about how bad some of these endowments were, and many had been miss sold they said if you felt unhappy you could claim for compensation. I don't think you could put a claim in now thought, they put a cut-off date in on them. When i tried to claim they said i was a few weeks out of time. Mine finishes in 2012 and i've been watching it fall in value, but it's so near the end decided to keep it going.

magpiecottage · 1 November 2009 at 5:20PM

If you have always received "green" letters (which would be consistent with a shortfall of just £500, then you will not be timebarred to go to FOS but, and it is a big but, FOS only has jurisdiction if whoever sold it to you agrees to it.

This is because it was sold before 29 April 1988.

If it was an employee or representative of Prudential (or Scottish Amicable) then it will because they were members of the Insurance Ombudsman Bureau at the time.

It will probably apply if it was sold by an employee of a building society or High Street Bank who also had Ombudsman Schemes which FOS now deals with.

If it was a broker or adviser who was independent then (even if they went on to represent Prudential) then you will not.

In theory you could sue them but they could then use Section 14B of the Limitation Act which prevents any Court claims in respect of actions for negligence more than 15 years ago.

So I cannot give a definitive answers but hope these facts might be helpful.

chevrons2 · 2 December 2009 at 10:36AM

Hi Lenski. I wish I was in your position! My 25 year endowment mortgage with Abbey Life ends 2 weeks after yours. Yours was for £20000 and your shortfall is £410 (2.05%). Mine was also for £20000 and my shortfall is £6804.22 (34.02%). I've already complained to the ombudsman and got nowhere.

dunstonh · 2 December 2009 at 11:00AM

A small shortfall like this is not worth the effort of complaining. You have almost certainly saved money monthly over a repayment mortgage (one of the reasons people often went with endowment was that it was 5-10% cheaper than repayment). So, despite the shortfall, you are still probably better off over the term.

What I dont get is, if the policy has been on track to pay out the target amount for 24 years, how is it over the policies final year its bonus reduces to below the target amount?!

If you have a 40% loss in year 1, then you have virtually no money invested and the loss is irrelevant. Plus, you then start buying investments much cheaper. If you have a 40% loss in the last year, then the value of say £60,000 loses £24,000. Again, monthly contributions buy investments cheaper but you dont have the timescale left to benefit from a recovery to get that £24k back. So, the final bonus drops.

During the recession/credit crunch, the stockmarkets fell over 40%, property fell nearly 50%, fixed interest securities fell 20-40% and even cash lost money (as institutions dont benefit from FSCS the same way as consumers do). There has been some recovery on those but that is the reason why the final bonus dropped.

EdInvestor · 2 December 2009 at 11:09PM

Bearing in mind the issue of who sold it to you, and that you will not be timebarred because of the green letters, you could make a complaint.

This would be based on the policy not matching your attitude to risk and would assume the salesman failed to mention that there was a risk the policy would not pay off the mortgage and that if you'd known that , you would not have taken out the policy.

However with such a small shortfall, there is a danger you would win the case but not get any compensation so it's probably not worth the bother, unless you want to punish the Pru who will get charged £500 by the FOS.

hansi · 8 February 2010 at 11:10AM

My Scot Am endowment to cover a 25k matures in May, and I have just been given an estimated maturity of £22.700, a shortfall of £2300:mad::mad:. Would the terminal bonus already be included in this figure please?

Crabby · 8 February 2010 at 12:32PM

a shortfall of £2300

If it makes you feel any better, my main Endowment with Norwich Union, which matures in June, is for £22300, and the best estimate shortfall is £6400.
I bet there are worse horror stories about.:eek:

EdInvestor · 8 February 2010 at 1:14PM

hansi wrote: »

My Scot Am endowment to cover a 25k matures in May, and I have just been given an estimated maturity of £22.700, a shortfall of £2300:mad::mad:. Would the terminal bonus already be included in this figure please?

Yes, but it might be reduced by an exit penalty for going early.This might not be imposed if you stay to maturity,but finding out how much it is (or even if it exists) might be easier said than done.:rolleyes:

Endowment insurance final bonus

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