Massive Endowment Shortfall. Is this right?

levers

Hello. My wife and I both have separate endowment policies which were taken out originally with separate mortgages we had. My wifes policy is about to mature. She has been paying almost £200 a month in for the past 15 years - a total of around £35,000. The projected payout at the time of taking it out, was £60,000. She has now been told by her insurer that she will receive just £33,000 when it matures. £2,000 LESS than the total she has paid in. I realise these things havent performed brilliantly but if this is right, she would have been better shoving the money under a mattress. Can this really be right?
Now I am worried about my endowment policy. I have a 25 year policy which is due to mature in 4 years time. Given what has happened to my wife, I am just paying money into a black hole if I keep contributing for the remaining 4 years. Would I better to cut my losses now and put my cash in a high interest savings account?
Thanks

Gorgeous_George

Your wife would have needed 6.36% growth after tax to reach the £60,000 pipe dream.

£200 per month for 15 years is exactly £36,000 so it is a £3,000 loss and the money would have been better under the mattress. Of course, she has had life insurance for 15 years which has some value. However, I think it is very expensive life insurance unless she's a sky-diving, firewoman in the TA.

Are you sure she has been paying £200 per month sine the beginning? Sometimes, monthly payments start lower and rise by 10% or so for the first 5/10 years.

Either way, it is pants but not totally surprising. I would be tempted to surrender any policy right now. There is so much uncertainty in all markets I can only imagine final payouts falling for many years to come.

Best speak to an adviser but make your decision based on what you want to do. Remember, it was an adviser that lied to you all those years ago. For adviser read salesman.

GG

EdInvestor

Post some info about the endowments to see what is best to do:

Provider
Guaranteed sum assured
Declared bonuses
Surrender value
Montly premium
Maturity date
Maturity forecasts
Interest rate payable on mortgage

levers

My endowment is a with profits plan with Norwich Union (originally Provident Mutual). It runs from Aug 1987 to Aug 2012. It has an original projected value (guaranteed death benefit) of £55,575 with a guaranteed sum assured of £22,285. I pay in £76 a month, and on my last statement the declared bonuses were £13,498 so presumably the current total value is £35,783 with 4 years to run. The statement said that annual bonuses are likely to remain at 0% for the foreseeable future but that maturity bonuses are likely. Presumably if I cash it in now, I forego any maturity bonus?

My wife's endowment is with Natwest Life. It runs from Oct 93 to Oct 08. She has been paying in £196 a month and the death benefit is £60,000. It doesnt seem to have a guaranteed sum assured, but on a statement from 2 years ago it says the plan value is currently £40,100 but that fund values can go down as well as up. Given that she is now being told she will only get £33,000 it must be a different sort of policy to mine (more risky?) as it seems to have lost £7,000 in the last 2 years.

Our mortgage rate is 5.24%

Any advice most appreciated.

baby_boomer

To levers

I wouldn't bank on any terminal bonus for your policy given recent market conditions and the fact that it's only got four years to run. dunstonh may have an idea of recent bonuses payable on this type of policy.

To get a true idea of its current worth you should ask them

a) for a surrender value
b) for an estimate of its maturity value if you continue to contribute your £76 pm and if the underlying with profits investent fund grows by 6% pa.

mikey72

Can you still make a claim for mis-selling, or has that gone now?

baby_boomer

Probably no longer possible.

I assume that more than three years have elapsed since they received their first "red letter" shortfall warning.

levers

Thanks. I did try and claim for misselling but was told that there was nothing they could do because the original company (estate agent) that set up the mortgage was no longer operating.

EdInvestor

Please post the rest of the figures ( surrender value, maturity forecasts, monthly premiums) for a view. The policy was sold pre regulation in 1988. Life companies and banks will consider complaints on these policies though it's not required, but estate agents/IFAs/lawyers etc will not.

levers

Hi,
I already posted all the figures I have, the monthly payments are given but for my policy I dont (yet) have a surrender value or maturity value, but as suggested I will obtain one.
I wrote directly to the life insurance company regarding the misselling and they were the ones that told me they cant do anything. Thanks

EdInvestor

levers wrote: »

I wrote directly to the life insurance company regarding the misselling and they were the ones that told me they cant do anything. Thanks

Did the lifeco sell you the policy ie, was the estate agent technically a "tied" advisor, working for them at the time, or was he independent?

If the former, lifecos will usually look at pre 88 complaints on a voluntary basis. If the latter there's no point in them passing it on if the agent is out of business because it won't be covered by the FSCS.