Endowment Rip-Off

inkybob

We have 3 endowment policies running together to clear our mortgage.
They are all due to mature during the next few weeks. We have been keeping a track of their performance over the last years and knew that there was likely to be a shortfall on at least one of them. After enquiries made on 10th June this year, we were pleased to learn that one had done well enough to make an additional £700, one would be short by £1450 and the third one with Pearl Assurance was 'Green' and on track to make the £9750 required. On 10th june the current value on the Pearl policy stood at £9509, slightly below what we'd hoped but now Pearl have given us the final figure for this policy and it is only £9049.
They have deducted almost £500 in about 10 weeks!
If they are all working with the same market how can the other two policies values be the same or have improved since June and Pearl be so different?
Is there anything we can do?

dunstonh

They have deducted almost £500 in about 10 weeks!

that is correct.

If they are all working with the same market how can the other two policies values be the same or have improved since June and Pearl be so different?

Pearl reduced their terminal bonus by around 10% with their spring announcement. Their fund is also geared more towards financial solvency than actual return. They also increased their equity content at the wrong time so have suffered more than those with a lower equity content.

All funds are not the same.

Is there anything we can do?

No. The value is not guaranteed and can go down as well as up. No "rip off" has taken place. You may have heard about the credit crunch and economies of the world getting close to recession and the stockmarkets falling back around 20% because of that.

Gorgeous_George

The 3rd was worth £9,509 in June but you kept it to the bitter end in the hope of making it to £9,750. That would have been an annual return of 10% less any additional monthly payments so nearer 8%.

You'd been checking on values each month which is good but you failed to act on the data that you gathered. It begs the question 'Why did you check it every month?' I would have cashed this policy in during June and invested the surrender value or paiod it off my mortgage.

This serves as a warning to the many others pondering what to do. By all means do nothing, but do nothing knowing the risk and for the right reasons.

GG

dunstonh

Most of Pearls homebuyer or homebuilder plans were conventional with profits plans that had a once a year update. Its always a risk if you wait until the announcement. In bad times, it can be worth getting out before the announcement is due. Especially on plans which have no penalty for doing so (Pearl had no penalty after the 10th year).

To be honest, it was really only ever going to go in one direction from last year and that was down.