Standard Life 10 year savings plan – MASSIVE shortfall

jack_spratt_2

A good competitive business does better serve a country better.

The national railways ???

British Telecom ????

Utility providers ????

I could go on

ronald208

In 1985 I took out a Pearl Endownment for £12,000. I still remember the !!!! who sold it to us saying you will get at least £30,000 in 25 years even although the figures written down only say £12,000.

We took action against them in 2006 for misselling and got the grand amount of £25.56 and the last statement we got was for £9,000 with a possible payout next year of £10,000.

I suppose it is a not bad return for £21.74 a month for 25 years:rolleyes:.

Ron

dunstonh

In 1985 I took out a Pearl Endownment for £12,000. I still remember the !!!! who sold it to us saying you will get at least £30,000 in 25 years even although the figures written down only say £12,000.

No need to be rude about them. 1985 had very few rules and regs and training requirements were low and most endowments did pay 3, 4 even 5 times more than needed. They only started falling short of expectations around 2000.

We took action against them in 2006 for misselling and got the grand amount of £25.56

So, after 21 years, you were only £25.56 worse off than doing savings. Nothing much to complain about there.

geewhiz

baby_boomer wrote: »

Very few have made any money in this 10 year period on their own if they have ventured outside BS/bank accounts.

Yet the OP has made over 40% thanks to Standard Life (free shares included) and is complaining!

!!!!!!.

I'm sure the OP will have had life cover for those 10 years too which would probably have cost at least half their monthly premium anyway !

jack_spratt_2

dunstonh wrote: »

No need to be rude about them. 1985 had very few rules and regs and training requirements were low and most endowments did pay 3, 4 even 5 times more than needed. They only started falling short of expectations around 2000.



So, after 21 years, you were only £25.56 worse off than doing savings. Nothing much to complain about there.

People seem to forget that they were considered by many as the best investment vehicle to pay off a mortgage in the 70s and 80s .
Quite often the illustrations that were provided for mortgage customers were !! you can have this a repayment mortgage or an endowment mortgage and the endowment always showed a large surplus at the end .

The problems came when companies introduced the low cost endowment plan which made there product cheaper by using a smaller sum assured and relying on the returns of the policy to pay the mortgage off and because it was cheaper customers went for it !!

When returns diminished the returns were not good enough and then the red letters arrived on peoples doorsteps about there endowment mortgages

About 1988 was when the first lot of regulation came in as Dunstonh knows and to be honest was a bit of a joke

turbobob

jack_spratt wrote: »

People seem to forget that they were considered by many as the best investment vehicle to pay off a mortgage in the 70s and 80s .
Quite often the illustrations that were provided for mortgage customers were !! you can have this a repayment mortgage or an endowment mortgage and the endowment always showed a large surplus at the end .

Yep, before regulation most illustrations gave examples based on then current bonus rates continuing. They were high in the 80's with its high inflation and investment returns so typically these illustrations showed huge surpluses. Of course, this favourable environment for returns did not continue and the rest is history. I'm sure that those selling the products (and those designing them) could not have foreseen the "lost decade" that would come in the future.

I've seen various examples of "sales aids" from the time and although they were technically correct (small print has warnings of bonus rates not necessarily being maintained and so on) to the layman they would almost certainly give the impression that endowment mortgages were "the way forward".

prowla

bendix wrote: »

So how can it be a con, then?

You sell the idea and skim over the downsides.

Kindof like taking drugs - it makes you feel good but it's going to mess you up.

jack_spratt_2

turbobob wrote: »

Yep, before regulation most illustrations gave examples based on then current bonus rates continuing. They were high in the 80's with its high inflation and investment returns so typically these illustrations showed huge surpluses. Of course, this favourable environment for returns did not continue and the rest is history. I'm sure that those selling the products (and those designing them) could not have foreseen the "lost decade" that would come in the future.

I've seen various examples of "sales aids" from the time and although they were technically correct (small print has warnings of bonus rates not necessarily being maintained and so on) to the layman they would almost certainly give the impression that endowment mortgages were "the way forward".

How true !!! Investment is very easy with hindsight !!

Market Value Reduction was wrote into many policies but in those days the likely hood of it actually being applied were slim as far as I am aware it had never been applied before these recent times

sandsy

It's not quite as simple as looking at the premium paid in and comparing it with the total paid out.

The premium has also paid for:
- life company's operational expenses of administering the policy for 10 years
- IFA's initial and renewal commission
- life cover for the last 10 years
- life company's profit margin

Plus tax at the life company's tax rate (typically about 20%) has been deducted from the investment return.

dunstonh

Plus tax at the life company's tax rate (typically about 20%) has been deducted from the investment return.

Although that only applies to gains (not income where its the same in unwrapped investments) and life companies still get taper relief. So, in reality its usually somehwere closer to 10%.

Another thing to consider is that this plan is obsolete and has been for some time. Indeed, it was on its last legs 10 years ago when taken out. Already at that time there would have been better options available (regular contribution PEP for example)

If it was an IFA used, then I'm surprised to see it recommended and there could be grounds for mis-sale as a PEP would have been cheaper, more flexible and more tax efficient. If it wasnt an IFA but a Std Life rep then they tended not to offer regular premium PEPs/UTs at low premiums and got round it that way.

That said, if you picked a UK growth fund or balanced managed fund over the same period you would have much the same result as the whole issue comes back to being a pretty awful 10 year period.