Even more worrying Endowment projections

tartanterra

Robert_Tycelyn wrote: »

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 didn't say the coming year was understated.
What they were alluding to, was the fact that stock markets are volatile, and as a result, almost impossible to predict. This means that any projections rely on guesswork. (Albeit, usually based on historic data). If stocks were easy to predict, then we would all be rich.

Robert_Tycelyn

Some words of reassurance in what you are saying - I will try to be a little more optimistic for my 2011 and 2012 maturity payouts.

Thanks again.

EdInvestor

You need to bear in mind that there is a "time lag" with With profits funds.This is causerd by "smoothing". Although the markets started to fall 2 years ago, policy values were only marked down late last year.this means that there will be further markdowns to come as the polucy values catch up with the market falls.That's the reason for the MVRs - policy values are up to 20% -30% higher than underlying assets at present.

Anyone who has policies maturing in the next couple of years is likely to find that the eventual payout is lower than the present surrender value.

You have been warned.

ukcarper

Edinvestor Does that hold true if the company are still paying final bonuses

EdInvestor

Yes, as you have probably noticed payouts have been declining for some years, ie terminal bonuses are falling. If the lifeco is not paying TBs, then you will get the guaranteed value plus whatever annual bonuses they care to provide (usually tiny). But you can often do better than that by cashing in and putting the money towards your mortgage directly.

ukcarper

Dunstonth I know what you say is correct and most people didn’t se the crash coming. But when these policies were sold back in the eighties it wasn’t made clear that the returns could be a lot less than expected and even though it has been possible to claim mis-selling a lot of people haven’t. Not being financial experts they wrongly assumed the projection were gave a fairly accurate prediction of what their policy would achieve, my point is as you point out no one really knows what is going to happen so what is the point of the projections.

ukcarper

Edinvestor I see the premium & interest savings could offset the additional bonuses. Still as my policy is subject to a £2300 promise from Norwich Union, which I assum I will get, as they have said they will give 3 years notice if they intend to withdraw it I will keep mine on.

jm28cardiff

ukcarper wrote: »

Dunstonth I know what you say is correct and most people didn’t se the crash coming. But when these policies were sold back in the eighties it wasn’t made clear that the returns could be a lot less than expected and even though it has been possible to claim mis-selling a lot of people haven’t. Not being financial experts they wrongly assumed the projection were gave a fairly accurate prediction of what their policy would achieve, my point is as you point out no one really knows what is going to happen so what is the point of the projections.

Projections are a regulatory requirement, but policies dont grow in such a linear way.