With Profits Regular Premium Endowment Policy

leveller2911

Ours state the same Kirsty...... It would be interesting to see if anyone else has the same issue....

I suppose the clue is in Dunston,s post "most of these plans,whilst obsolete now ,were the norm 10-50 yrs ago"....... maybe we know why theyre no longer popular...

Dick_here

You've had 10 years of life cover of course, that isn't free. If you'd been run over by a bus the week after taking the policy out, someone would have got back a lot more than you'd paid in.

dunstonh

The following post is in two parts. First is responding to comments above. The second is giving an example. It gets a bit wordy in that second bit and is only there to give you an idea of the how monthly premiums can sometimes give you less than paid in.

The text below states the following;

"These figures are only examples and are not guaranteed - they are not minimum or maximum amounts. What you would get back depends on how your investments grows"

There is not just one warning text line. Look below that one and you will find you could get back less than you pay in.

My gripe is that I am getting back less than I paid in over the 10 years - I took this policy out in good faith.

And no-one had a crystal ball knowing what the future returns would be. 10 years ago, did you see the biggest recession in generations coming?

The wording on the letter from the Financial Advisor states that I held a "cautious attitude towards investment risk and I used this when selecting the most suitable policy type for you".

And that is the product and fund you have. Cautious is not nil risk. It is some risk and in your 10 year period it didnt pay off. In most 10 year periods it does. You were just unfortunate with timing.

I have read through my paperwork and see no reference to getting back less than I paid.

Check again. It will be on the illustration under the projection figures. It will also be in the key features document in the "risks" section. This used to the first page so you could see it up front.

Unfortunately yes...
the sum assured is £2,000
the amount I paid over 10 years is £2,484
the value now is £2320.66

So, the minimum sum assured is £2000. Bonuses are added to that.

the 1st says minimum sum assured is £3,450 the second is £2,000......

The £3450 is the life assurance figure. The £2000 will be what the bonuses are added to. The £2000 is the minimum.

Given that we would pay in by the end of the term £4,320-00 into each ,I do think its very very poor if that does end up the case. Given theyve had the money for 18 years(proportion of ) .In 18 years they would have flattend out the ups and downs of the economy....

They have not had your money for 18 years. The problem is that they have only had the bulk of the money for around 5 years and it takes so long to build up a value. Then just as it was built up to a nice value, along comes a major recession and global economic event that wipes over 40% off the stockmarket, 20-30% off fixed interest and 50% off property. Even cash lost money as they dont get FSCS protection.

Jeez, if that does end up being the case I could have made less of a loss on shares.We thought(maybe ignorance mixed with lack of explination) that there was little risk...

You wouldnt have made any loss (even assuming a basic equity fund). The higher risk funds have made far more. They have been a lot more volatile but you would have turned in a good profit.

Given that we've had 10 yrs of boom you'd think theyd be capable of making some profit out of Kirsty's and our money???......

We had 10 years of boom but the UK stockmarket was the worst performing Western stockmarket in that period. However, as mentioned above, you were not fully invested for that 10 year period. Ignore returns for the moment. Do 10 years of premiums then take away say 30% (as an average). That is what has happened. If that 30% drop had occured in year 3 or year 7 then it wouldnt be as bad. Problem is that it occured in March/April 09.

at the time, everyone in my family had one and it seemed to be the thing to do...

Not in 1998 they were not. They went obsolete in the early to mid 90s. Although some of the salesforces held on to them until 1998. I believe Pearl may have been to dump them under advice. Direct marketing/adverts still sold them well into the 2000s (AXA cashbuilder for example) but they dont have to worry about quality when selling direct without advice.

However, prior to 1995, they were common place. depending on the 10 year period, you would often get 2-3 times more than you paid in.

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part 2

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I suppose the clue is in Dunston,s post "most of these plans,whilst obsolete now ,were the norm 10-50 yrs ago"....... maybe we know why theyre no longer popular...

Nothing to do with popularity. Its to do with that particular tax wrapper not being as good as ISA or unwrapped unit trusts. However, if you happened to have picked a bad unit trust fund or investment trust then you could lose money the same way.

Let me pick a decent cautious fund. The invesco perpetual income plus. Over the last 10 years at £20pm (to close of business on 11/11/09).

on 25/08/08 it would have been worth £2941.
on 24/10/08 it would have been worth £2348.
on 06/03/09 it would have been worth £2332.

So, in Aug 08 it was worth more than paid in. But a few months later it was almost worth less and by March 09 it was worth less than paid in.

Does that make it bad? No, not at all. Its a top rated fund. But you would have lost money to that point purely down to timing.

Now lets move on to exactly 10 years and see the value on 11/11/09 and that was £3717. So, just 7 months after hitting a low point, its gone up massively. Look at the difference timing can make. Back in March you would have been getting less than you paid in. Now, you are getting closer to double what you paid in.

Now, that fund is highly rated and a top consistent performer. However, the products you have are old, obsolete, probably bought through a tied sales rep of the insurer and not an IFA. So, performance is likely to be average at best. Picking say the old Back Horse High Reserve fund (now scot wid but reason for choice is that Lloyds bank sold it and its in the same sector as the inv perp fund). Same 10 year period with £20pm and at the low point it was £1869 and yesterday would have been £2695 (compared to Inv Perp £3717). So, you can see what difference quality makes as well.

Could you complain about the Lloyds Bank one? No. Its all they had to sell (just like your insurance company reps). Their remit is to sell the most appropriate product in their range and they did that. They dont have to sell the best as that is the IFA remit. Not an insurance company rep remit.

khchick

I appreciate your responses so far. I hear what your saying; at the time I was not aware of the risk/potential of not getting back at least what I paid in. Was 19, first job and family friend set it up for me (he no longer works with Royal Liver...).

I checked over the Key Features; Risk Factors Section - this is what it says in full;

The proceeds of you plan will depend on investment performance.

Your circumstances may change forcing you to stop paying premiums.

Our deductions may turn out to be different from those expected.

I rechecked the text at the illustrations in the what I might get back after 10 years...

"These figures are only examples and are not guaranteed - they are not minimum or maximum amounts. What you would get back depends on how your investments grows.

You could get back more of less than this.

All insurance companies use the same rates of growth for illustrations but their charges may vary.

Do not forget that inflation would reduce what you could buy in the future with the amounts shown."

Anyway, cheque is banked. Plan to write to the Royal Liver and see if I get anywhere...

Thanks!
Kirsty

magpiecottage

My understanding of this is that you were 19, in your first job, I am guessing you had no dependants and so you had no need for life cover.

That being so, the adviser should have drawn your attention to the fact that the policy included life cover which you did not require but would be paying for.

I have seen the Financial Ombudsman Service uphold complaints on this point - it would depend on whether the Ombudsman believed you were in a position to make an informed decision or, if not, that with the information you would have chosen no differently.

dunstonh

I have seen the Financial Ombudsman Service uphold complaints on this point - it would depend on whether the Ombudsman believed you were in a position to make an informed decision or, if not, that with the information you would have chosen no differently.

You tend to find that is more common with IFAs or with salesforces that had a suitable PEP or unit trust option. Where the tied rep had neither PEPs or unit trusts you tend to find they favour the rep.

leveller2911

Thanks for the replies Dunstonh...We contacted the Co-op today and the surrender value of our sons plan (as of today) was £2,457-00.We have paid in £2,518-00....
We are not sure whether to surrender it and put the money into a fixed bond or some other form of plan,given the state of the economy etc... Would appreciate your thoughts.....