Norwich Union - Endowment Price promise

dunstonh

The Norwich Union endowment promise has been mentioned recently a few times and I have had a couple of messages asking for clarification to what that is.

In Dec 99, NU issued shortfall projections and the figure at 6% was the amount that would be used under the shortfall promise.

This means that if your shortfall on the 2000 bonus statement was £5000 then providing NU achieved 6% average return until maturity, they would make up that shortfall of £5000. (If the shortfall was £2450, then that is the maximum. So everyone would have a different figure but it is the one on your 2000 bonus statement that matters). This is the promise amount that applies to you.

NU didn't achieve 6% average (at least not on the annual bonus) and the position now is that if the endowment falls short on maturity, they will pay up to the promise amount on top of the value. So, if your promise amount was £5000 and the endowment falls short by £3000, then NU will make up that £3000 difference. If the endowment is £1000 surplus, then there is nothing to make up. If the endowment was £7000 short, then NU will make up £5000 of it but not the remainder. (remember to replace that £5000 promise figure with the one that applies to you).

The price promise can be quite valuable to some people but it is going to be less valuable to others. To see what yours is, look at your 2000 bonus statement and see what the 6% shortfall figure is. That is the figure your "promise" and it is not included in any projections on the endowment. You have to add that on top. Just as NU do not include any accrued terminal bonus in their projections either.

bambam_2

Does this affect CGU life policies that were on target in 2000 and nose dived after take over? Sorry I am completely hopeless with these things and I just don't know what to expect at maturity. I did post projections on another thread about endowments but there was a lot of other 'activity' at the time and no-one responded.

dunstonh

CGU invested in the CGNU with profits funds do get the "promise".

Take a look at your 2000 bonus statement and it should mention it. It was also referred to in the 2004 bonus statements.

If you cannot find it, then you can ask NU to provide it (dont ask the telephone service line as they wont have a clue). Put it in writing. Alternatively, get an IFA to ask for it on your behalf. We get better service levels out of NU than the average consumer and we are not passed to India.

EdInvestor

I had a look around for this one myself.See question 3 below.

http://www.aviva.com/files/pdf/agm2006_faq.pdf

So it basically applies only to those endowment policyholders who had a shortfall at the 6% projection at the end of 1999.

If there is still a shortfall at at maturity,NU will pay it, up to maximum of 5k.

You wouldn't think there would be many people showing shortfalls at the end of 1999, which was the point when the stockmarket was at its peak :huh:

payless

You wouldn't think there would be many people showing shortfalls at the end of 1999,

Apart from those that were set up on the earlier 7.5% mid projection ( very common) plans OR the earlier LC80 plans??

dunstonh

IIRC, it was 7.5% until around 1996-1997. So moving to a 6% projection would automatically show a shortfall regardless of performance.

Later ones of course wouldnt have had a chance to make any money yet so they would appear in shortfall as well just because of the way the endowment grows is different to the projection method.

payless

IIRC, it was 7.5% until around 1996-1997.

7.5% was still the industry mid rate for projections ( and hence the most commonly used figure for calculating funding) on low cost WP / UL mortgage endowments until July 1999

dunstonh

Doesnt time fly. It feels longer than that when it moved to 4,6 & 8 on taxable investments.

bambam_2

My NU (previously CGI/GA/PMLAA) endowment was showing a surplus at 6% in 2000 (as were my Standard life and Legal & General). So I take it that means the promise does not apply?

dunstonh

If you had a surplus in 2000, then you have no "promise" value so you can look at the current projections (and use between 4 and 6%) as the likely value.

bambam_2

Just my luck.
It is due to finish in 3 years time. Projections in March 2005 were 4% £24000 (£3500 shortfall) and 6% £26000 (£1500 shortfall). It was showing a surplus of £4500 at 6% in 2000.
At least with the Standard Life one we got some compensation for mis-selling but this one was pre FSA agreement and sold by a solicitor no longer in business.