L & G endowment matures at 99%!

silvercar

Some endowment good news.

25 years ago I took out a low cost, low start with profits endowment for 43k.

I did file a misselling claim that calculated that I was mis-sold but that I was better off than if I had taken a repayment mortgage so not entitled to compensation.

My IFA reccommended that I keep the endowment going.

Got a payout latter forecasting the payment for next month to be about 42.5k.:T So not the cash wads that I was promised but at least its paying full value.

I suspect that its good fortune is due to the low start, as the premiums must have been calculated to an increased to compensate for the lower rates at the start.

If anyone is interested in the numbers:

monthly payments:
year 1: 35
year 2: 43
year 3: 52
year 4: 61
year 5-25: 70.30

I calculated that as an APR of slightly over 5%.

dunstonh

Actually, low start endowments tend to pay out less than level endowments as the charges end up being higher of the term than level payments. Had it been level payments from day one, you would probably have hit surplus on this one as well as paying less over the term (year 5 to 25 would have been less per month)

Still, nice to see a rare one get close as it can. Especially from a provider that is generally not considered being an ideal one for With Profits. Can you recall how poor the projections got at the lowest points?

silvercar

dunstonh wrote: »

Actually, low start endowments tend to pay out less than level endowments as the charges end up being higher of the term than level payments. Had it been level payments from day one, you would probably have hit surplus on this one as well as paying less over the term (year 5 to 25 would have been less per month)

Still, nice to see a rare one get close as it can. Especially from a provider that is generally not considered being an ideal one for With Profits. Can you recall how poor the projections got at the lowest points?

In recent years the projections were good. I've only got paperwork for some of the last 10 years.

In 2003 the projected final amounts were:

34,800 (4% growth), 39,900 (6% growth) and 45,700 ( 8% growth), target = 42800.

The final bonus rates vary widely. In dec 2003 was only 29%, in 2007 it was 96%, in 2008 it was 55%, 2009 it was 68%, 2010 it was 74%.

When we complained in Feb 2006, they calculated the cash-in value as £28115.80. So the £4k of payments since then have yielded and extra 14K.

silvercar

Actually, low start endowments tend to pay out less than level endowments as the charges end up being higher of the term than level payments. Had it been level payments from day one, you would probably have hit surplus on this one as well as paying less over the term (year 5 to 25 would have been less per month)

I'd have thought that if we had taken a level payments endowment, the monthly payments would have been lower (as you say) and consequently the final pay out would have been lower. So by being forced to pay in more due to the low start, we have gained in final value?

dunstonh

silvercar wrote: »

I'd have thought that if we had taken a level payments endowment, the monthly payments would have been lower (as you say) and consequently the final pay out would have been lower. So by being forced to pay in more due to the low start, we have gained in final value?

The bulk of the increase in the premium was charges.

You cant do it anymore (as no-one does endowments) but I remember getting level and low start illustrations on a like-for-like basis and the level plans always had the lower charges and paid out the greater amount on the same projected growth rates.

In 2003 the projected final amounts were:

34,800 (4% growth), 39,900 (6% growth) and 45,700 ( 8% growth), target = 42800.

So, it looks like you have exceeded 6% p.a. net since then (projections are actually gross of charges. So, when it shows 6% on an illustration that means before charges. You have had something like 7% after charges. I don't think I would have estimated the returns on the L&G plan to be as high as that as a best case scenario. I would have gone by the £39,900 figure as being the most likely outcome. It just shows you can be down on these things too much at times. Or perhaps i have got used to underestimating and coming in better rather than the other way around which was more 80s/90s style.

silvercar

SL one matures in less than 2 years. That is forecast at about 60% of original aim. SO you may be right to be cautious.

magpiecottage

dunstonh wrote: »

Actually, low start endowments tend to pay out less than level endowments as the charges end up being higher of the term than level payments.

That would be the case for a unitised policy and for policies which were set up using projected maturity values to establish a premium.

However, prior to their sale becoming regulated in April 1988 conventional with profits low cost endowments used to be established on the basis that a guaranteed basic sum payable on maturity plus 80% of the annual bonuses would clear the loan if the annual bonuses continued at the rate applied at the time.

The annual bonus is calculated as a percentage of the guaranteed basic sum and a percentage of existing bonus, as is the terminal bonus.

That means the low start and level premium policy would produce the same outcome - although the low start would be more expensive over the entire term.

A 25 year conventional with profits low cost endowment maturing now will have been set up using that system, so I think the OP is correct on this point.