Endowment with Standard Life.

Gorgeous_George

Be interesting to see what the final maturity value is Jeanette.

I'm not a IFA (or any kind of adviser) but I would wager you will not be any better off for holding on. SL have shareholders to please.

GG

glitter123

syco1 wrote: »

The one consolation is that you presumably had Standard life shares out of the deal.

Doesn't apply to everyone. We got no shares because ours is a "managed" fund. :mad:

Jeanette1965

I spent a lot of last night doing sums and will be marginally better off approx £500 each better off if we keep on paying it.

I have no need for the money at the moment and £500 is £500. Could even be more so might be in for a nice surprise but not banking on it.

Milarky

Can I just hijack this thread and turn it to a general discussion of the current mortgage endowment situation?

Here's an item from Moneymail in March:

http://www.thisismoney.co.uk/mortgages-and-homes/article.html?in_article_id=500489

Millions of homeowners are sitting on a mortgage time-bomb that is set to detonate within the next five years as endowment payouts slump again.

Between now and 2015, an estimated two million endowment policies will mature and some companies admit just one in every 100 is on target.
Standard Life, whose endowments were sold by Halifax, estimates that 97% of the 46,000 policies maturing this year will fail to meet their target.

Scottish Widows, part of Lloyds Banking Group, says 97.6% will not come up to scratch.

Will Endowments make a 'loss' or 'profit'?
If we were to total up the number of future maturing policies based on this picture and their likely average shortfalls and then offset these against the total number of maturing policies to date and their average realised surpluses - how would endowments now be judged as a product?

I've got a feeling that the net picture will turn out 'negative' - meaning that the present discounted value of all endowment payouts will be somewhat less than the (similarly discounted) present value of the original mortgage advances which they were taken out against.

For example, suppose there had been approx 100 bn of mortages against which all endowment policies have been sold. Suppose 50 bn of these had already reached term and the associated payments were 60 bn - That would be a 10 bn past surplus, Suppose the remaining 50 bn of loans will receive total payouts of 30bn (this seems extreme!) That would be a total shortfall of 10bn...

I could be wrong in my gut feelings and it may be the case that the endowment pond at least exceeds the mortgage pond by some margin - even if individually there are shortfalls. But if it turns out the average payout is still less than the average mortgage would have been haven't regulators (not merely individual firms) got to accept responsibility for that? [Remember, this problem became painfully apparent at least by 2003 - seven years ago - with most maturing polices at least 10 years still to go. But nothing was done - presumably in the interests of a 'quiet life'?]


Were the 'wrong kind' of endowments largely sold?
When I took out an endowment it really was just to pay off a relatively small mortgage. I was sold a low-cost endowment. But it was never explained to me that this was only one type of endowment product. It seems that most people still ended up buying these investment-geared policies - even though the 'full-cost' endowment product would surely be the obvious thing to recommend for most if not all of them? Although more expensive [perhaps someone can cite the relative premiums?] full-cost plans guarantee to pay the mortgage - not simply a third with the rest made up from discretionary bonuses. What happened to full cost plans? Were they simply not sold in many cases where they should have been or were just too uncompetitive from the outset and LC endowments invented to make investing in your homeloan 'look' cheaper than paying it down directly?


Was the 'added risk' of WP never recognised?
The 'mis-selling' solution does not seem to have been a solution at all to me. The regulator probably invented 'mis-selling' in order to not have to consider the wholesale suitability of endowments (especially LC type.) In addition 'with-profits' gives an added toxic twist to things - because WP is a form of Ponzi scheme (anything which allows different premiums into the same scheme to carry different values - such as pension contributions by 'old' and 'young' defined benefit members is a form of Ponzi, for instance.) Endowments - were they strictly unitized - could only carry a 'risk of return failure'. Therefore it would be impossible for WP funds to 'run out' of money - since nothing would ever be paid out which was not directly backed by the sale of a share or other instrument. Since units are purchased 'directly' my 'investment' can't get worse than the underlying market (eg FTSE) in which it is valued - not so if 'smoothing' is permitted.