Even more worrying Endowment projections

Robert_Tycelyn

The update on my three Norwich Union policies given last summer were as follows:

Policy 1 (maturity date August 2012 - Target amount £67000)
4% £48900
5% £51200
6% £52900
Policy 2 (maturity date April - 2011 - Target amount £29450)
4% £22400
5% £23100
6% £23900
Policy 3 (maturity date March - 2011 - Target amount £4500)
4% £3380
5% £3490
6% £3610


I recently contacted Norwich Union to ask for updated projected matuiry values for my 3 endowment policies.

They have today supplied me with the following info.:

Policy 1 (maturity date August 2012 - Target amount £67000)
4% £41800
5% £43200
6% £44600
Policy 2 (maturity date April - 2011 - Target amount £29450)
4% £18900
5% £19300
6% £19800
Policy 3 (maturity date March - 2011 - Target amount £4500)
4% £2860
5% £2930
6% £2990

I accept that the current financial climate will have an effect on fund values but I am horrified by the drastic cut in the projected value of my policies.
If I take the 4% as a possible scenarion the updated values leave me with a further £11120 shortfall. Is 4% the more realistic one to take?
Have I missed something obvious (e.g. has the final bonus not been added)?

Apart from adding to my worries I am finding it extremely difficult to predict the payouts that I might receive in the relatively near future.

I would be grateful for people's thoughts and comments.
Thank you.

ukcarper

My Norwich Union endowment has just matured and I haven’t even got the 4% figure from last year. Also don’t expect it to be paid anywhere near the maturity date as mine matured over 3 weeks ago and still hasn’t been paid.

Robert_Tycelyn

Thanks ukcarper. I have read that the 4, 5 and 6% do not actually signify the tue amounts of possible payouts but I must say that I don't really understand why these figures are given otherwise. Do most people not take them as possible indicators of final payouts? I did.

ukcarper

I agree with you, what is the point of them if a year after you've received them they pay out 5% less than the worst figure. I have another policy maturing next year and have alreay paid £5000 of the original £45000 mortgage the two policies were for and I'm beginning to wonder if I will cover the remaining £40000.

Robert_Tycelyn

Did you get the additional 'endowment promise' amount?

ukcarper

The one that has just matured was on target at the time so it wasn’t applicable. I'm hoping to get it on the one maturing next year

EdInvestor

Robert_Tycelyn wrote: »

Thanks ukcarper. I have read that the 4, 5 and 6% do not actually signify the tue amounts of possible payouts but I must say that I don't really understand why these figures are given otherwise. Do most people not take them as possible indicators of final payouts? I did.

They are illustrations of what you might get if your investments grow by the various percentage amounts.To be realistic IMHO they really need to have figures for -6%, -4% and zero growth as well as the positive figures.

This would at least alert policyholders to the possibility that the value of their investment might go down as well as up, something which quite a lot of endowment holders don't really seem to understand.

This is likely to be the case for at least the next couple of years.

ukcarper

The way I understand it is that the basic sum assured plus Regular bonuses already added is guaranteed, so the amount of money you already have won’t go down. But in this climate it might be a good idea for the insurance companies to use more realistic growth figures than 4%, 5% and 6%. as you say these are more likely to be negative figures. As most people us these figures to see if their mortgage will be paid off.

dunstonh

But in this climate it might be a good idea for the insurance companies to use more realistic growth figures than 4%, 5% and 6%.

The growth figures are designed for long term. So, whilst they may not be good for last year, they could be understating what is coming this year.

For example, the stockmarket fell back over 40% in the 18 months before October last year. It has grown 16% since then. 4,5 6 or whatever doesnt fit any of that.

In addition the projection rates assume you get 4, 5 6 or whatever, each and every year. Investments dont work like that. So, even if you got an average of 5%, it wouldnt match the 5% projection figure.

Robert_Tycelyn

Thanks once again Dunstonh. Just to be clear - sorry to sound a bit slow - when you say that they are understating what is coming this year - do you mean that they are being over-cautious or that it is likely to get much worse?

Thanks.

dunstonh

Saying what is going to happen this year is going to be futile as no-on knows. However, the general feeling is that the markets have bottomed.

Many of the bonus and MVRs were set in November or early december before much of the recovery was seen. So, on that basis, you would expect the WP returns in 2009 to be higher than the projection rates. Although you will see the providers take different approaches with some reducing/removing the MVR and others keeping the MVR but upping the bonuses (or something in between). Unitised with profits are likely to react more quickly. Conventional with profits more slowly. Indeed, conventional may take as long as April 2010 before they reprice.

The markets have already priced in the recession, unemployment etc to a certain level. So, only unexepected news would hit that harder or perhaps better if its not as bad.