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endowment forecasts
Comments
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My point is that according to my update I was on target to meet the target amount and as the worst case 4% growth I was only £300 short I was quite happy but as it turns out I'm £1500 short so what is the point of the update if it is that far out .
What charges will or have I accurred and surely the projected amout should take these into account or how can you tell if your endowment is on track.0 -
My point is that according to my update I was on target to meet the target amount and as the worst case 4% growth I was only £300 short I was quite happy but as it turns out I'm £1500 short so what is the point of the update if it is that far out .
Projections are just examples if say 4% a year was achieved year in year out until maturity. Investments dont work that way. You may get 12% one year, 6% the next and minus 20% the year following. With profits plans, especially conventional with profits, were never designed to be given projections. Yet the rules changed and they have to.
Whilst 4% may have been enough to almost hit target, 2008 saw the stockmarket drop nearly 40%. You dont see a minus 40% on the projections!!
As I said before. They are example projections. They are not forecasts. My running rate on my investments is just about still in double digits p.a. average Yet I am not able to give projections that reflect what I have done before. I have to give the same projections, using the same rates that investments with a running rate of minus 10% have.What charges will or have I accurred and surely the projected amout should take these into account or how can you tell if your endowment is on track.
Projections are just examples. They are not reliable by themselves to look at the potential returns in the future. Many unit linked endowments would have suffered large losses over the last year and gone into red warnings with projections miles off. Yet they could still end up in surplus if they have long enough because they are now buying units cheap and the years that follow bad periods are often very good. Returns dont follow the same basis as 4% a year every year one after the other.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I see what you are saying in which case the updates sent out each year are a complete waste of time0
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I see what you are saying in which case the updates sent out each year are a complete waste of time
You need to look at the projections m in conjunction with the asset mix of the company's With profits fund and the performance of the markets the money is invested in. Analysis of the latter will tell you roughly what you can expect in the way of performance. If you judge the outturn overall will be 6% on average, then the projection tells you where you will end up.
Since virtually all main markets ( equities property and bonds) have been down quite badly over the past year/18 months, then the WP performance is likely to be down.This would be mitigated for a maturing policy to some extent by "smoothing" - but more at some insurers than others.
If the figures made you think that the lowest return you would get in the last year of your policy was 4%, then indeed they are misleading.
The problem is that the assumption is an IFA will be advising you about the policy and he will explain all the background.Of course, with endowments this simply hasn't been the case for many years. Few ordinary investors (and actually many advisors) don't really understand how With profits works and may not realise the big differences between different companies these days, as the product is basically obsolete.Trying to keep it simple...0 -
I think you make my point most policy holders are not financial experts so will at least think that the figure give some indication of what they are likely to receive.0
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