Endowment shortfall Red Alert Scottish Widows

rosegirl36

I have just received my yearly update on the performance of my endowment plan with Scottish Widows.It is a 25 year endowment which will have 10 years to run from December, they say there is a high risk of shortfall with the projection of £10450 shortfall on a £44650 endowment, this is down from a figure 1 year ago of £12000.Not sure what to do here, there is around £66000 owing on our mortgage of which £15500 is owed on repayment and £44650 on the endowment.I have gone down the missold route years ago to no avail, i just need to know what my options are regarding making up the shortfall? My mortgage is with Intelligent Finance

Cannon_Fodder

Down from a year ago is not much of a surprise, as the stock markets have had a bad year.

Personally, I would not rush into premature action on the endowment. Get your statement in a years time, it will probably be back towards £12k.

You could opt to make some overpayments, subject to the terms of your mortgage, to ensure there is not too big a shortfall come maturity. If in the end it does meet the original target, there will be a surplus to offset those overpayments.

If it is affordable, you could switch some more/all to repayment basis...the endowment just becomes a stock-based savings plan...?

rosegirl36

I actually meant the expected shortfall has gone down in the last 12 months from £12000 to £10450 which is shrinking the shortfall, why the shortfall has gone down in the present climate i dont know?However i will still have to do something about it. Does anyone know how much it would cost to convert the endowment to repayment?

yelf

Im amazed at how many people simply dont understand endowments. There's no such thing as an endowment mortgage, you dont turn the endowment to repayment.

You have an interest only mortgage which should be paid off by the endowment. you wil need to turn the proportion of the mortgage which represents the shortfall to repayment, contact your mortgage provider.

rosegirl36

I do understand the difference, i have an endowment to cover the interest only part of the mortgage and i have a projected shortfall on the endowment of 10450 so wont be able to pay that proportion of the interest only part of the mortgage off.I have got 10 years left to cover the shortfall, before contacting Intelligent Finance i would love to know if there are other options?I can see it being quite expensive to convert the proportion to repayment

yelf

you will have to fund the shortfall from somewhere. Be it saving elsewhere to pay off the shortfall when it arises, or making extra payments to the converted part of mortgage. Thats it - no miracle cure unfortunately. It will effectibely cost you £10450 no matter what you do (you coukd try investments but thats what the endowment is)