quick bit of info on Standard Life shortfall please

dunstonh

and then when someone takes this advice and loses out, what is the comment?

There is no evidence that the poster took any advice. Certainly nothing in his post to even suggest it. So, if you take on that responsibility for yourself then you have no-one to blame apart from yourself.

Its amazing how many times you tell people to surrender policies not knowing the full facts. Of course, they will have no-one to blame either when their mistake is realised.

EdInvestor

Full facts? Unfortunately there are no "facts" when it comes to With- profits.The insurance companies can do exactly what they like. One minute there is a mortgage promise, the next minute, it's gone. One minute the WP fund is cash strapped, the next minute someone finds an extra billion sloshing around in there. :huh:

All I do is work out the poster's position if he took the known amount NOW, ie the surrender value, and used it to pay off another known amount, the mortgage loan, with a known interest rate.

You can waffle on about terminal bonuses and projection rates as much as you like, but neither you nor I , nor anyone else posting on this thread, nor any IFA, nor Standard Life itself, nor any TEP trader, has any idea how much the poster might get at maturity.

It's all guesswork. And that's a fact.

Mr_helpful

You can waffle on about terminal bonuses and projection rates as much as you like, but neither you nor I , nor anyone else posting on this thread, nor any IFA, nor Standard Life itself, nor any TEP trader, has any idea how much the poster might get at maturity.

It's all guesswork. And that's a fact.

This is true for any investment with possible exception of guaranteed growth bond. so assuming the client has enough cells between the ears to realise that he has an investemnt where is the mis sale when it doesnt make the target? All this waffle about full facts, I wonder if you ever have full facts for any collective investment the manager can change the mix and types of investments whenever he likes. I could say finspreads shouldnt have allowed me to put money on the ftse the day it dropped courtesy of worldcom, because no one gave me the full facts about wordcoms accountants not being able to ad up. I lost £1000 in a few minutes can i sue any one? Its stupid expecting someone to have the full facts of something when they cant even be bothered to read the quote until several years later when its all gone wrong

dunstonh

You can waffle on about terminal bonuses and projection rates as much as you like, but neither you nor I , nor anyone else posting on this thread, nor any IFA, nor Standard Life itself, nor any TEP trader, has any idea how much the poster might get at maturity.

That is correct. However, if you dont take the current position into account, then how can you make any reasonable assumptions on what the likely outcome will be.

You always totally ignore the final bonus and mortgage promise value. You dont even mention it. You should mention it because the poster needs to know what they could be losing if they surrender/sell. It is then for them to decide if its worth it or not.

The mortgage promise from Standard Life and NU is likely to stay because both have funded for it and the amount isnt going to increase any more for them. Neither is in such a bad state that it has to remove it.

Terminal bonuses are where the bulk of the return is going to be in the future. Sure it can be reduced/removed but it is part of the policy and needs to be considered.

Someone with a realistic projection showing a £3000 shortfall but has a £8,000 terminal bonus needs to be told that they are currently in the position for their endowment to pay a £5,000 suprlus despite the projection showing shortfall. Sure they should be warned that terminal bonuses are not guaranteed and it is then for them to decide if its worth it or not.

EdInvestor

To make a reasonably well informed guess you need to know

a)The surrender value (which includes accumulated terminal bonus so far)

b)The size of any likely penalty included in the S/V for early departure - these days these are usually low or non existent

c)the investment mix of the WP fund, which will give you an idea of its likely long term performance

d)the size of any Market Value Adjuster - these days likely to be very small or non-existent.

e) the long term trend of payouts

f) any additional factor such as mortgage promise


In Standard Life's case, we are looking at a return going forward of 4-5% at absolute best, taking in all these factors.

Mr_helpful

d)the size of any Market Value Adjuster - these days likely to be very small or non-existent.

Since when has this been a feature of a traditional with profits endowment? I think we are getting confused again arnt we? Would I be correct in thinking the MVA is a feature of a unitised with profits policy and would I be correct in thinking The OPs policy is traditional?

dunstonh

IN SL's case we maybe looking at 4-5% in the annual bonus (I would look at 4% personally). However, the terminal bonus could be another 3 or 4% or even double figures.

You also forget the cost of life cover/CI. Any replacement life cover costs would need to be considered.

You also need to know if there are any future penalty free exit points, other funds available, charges (especially if allocation rates change after an anniversary point).

jamesd

twisttwins02, if you didn't know it, the redress was to put you in the same position you would have been in had you made repayment mortgage payments.

Because repayment mortgage payments are higher than endowment mortgage payments, you will still be short by the difference between endowment and repayment mortgage payments when the endowment finishes. That's because the redress takes that into account and is reduced by the mortgage payment money you saved over the years.

To get back on track, work out how much the difference in endowment and repayment mortgage costs were and add the value of that to your mortgage repayment pot - or make a lump sum payment off the mortgage of that amount. You'll also need to continue to pay that extra payment each month until the mortgage ends.

You should expect the endowment to continue to show shortfalls, since the shortfall calculations do not include these extra payments that you have to make.

EdInvestor wrote: »

Amazing how posters are continually urged not to surrender their endowments, and then when someone takes this advice and loses out, what is the comment?

The only blame here is for not knowing that the redress didn't cover the difference between endowment and repayment mortgage monthly payments for a couple of decades and the posters still have to pay that difference into the mortgage somehow.

EdInvestor

A further problem arises in getting any kind of advice on whether or not to surrender an endowment.Apart from the complexity in working it out and the time taken to do all this analysis, many IFAs are no longer selling endowments or any other WP product and therefore don't have the knowledge or the facts easily to hand.

And even if they can perform an analysis, it is likely to be

a)too expensive for the investor to pay for it

b)not conclusive enough: ie the advisor cannot make a clear decision on whether the policyholder will make a loos or a profit by holding on or selling.

Thus he will suggest you do nothing because if he suggested anything else and you made a loss, he could incur a complaint.

At least if you go to https://www.apmm.org and seek a quote for selling your endowment you will receive a "steer" based on facts from reasonably well informed people .

Your endowment is either going to

a)Attract no interest or offers, and thus may be considered a dud which should perhaps be surrendered (return of < 4%)

b)Attract a few offers but with a low premium <10% over surrender value (SL is usually in this category) - probably should be surrendered, return of c.4%

c)Attract several offers at a decent premium over surrender value - consider keeping, as more likely to produce a respectable return (eg 6%)

Some more confusion in the papers today

MILLIONS of savers stuck in “zombie” with-profits funds received bad news last week when Resolution, the biggest firm in the sector, revealed that payouts from more than two-thirds of its funds fell last year.Resolution owns a staggering £42 billion of closed with-profits funds, after buying the closed funds of Royal & Sun Alliance, Scottish Provident and Scottish Mutual.

Last week it said payouts from 70% of its maturing with-profit funds had fallen over the past 12 months.Resolution said: “For the industry as a whole, long-term payouts have continued to trend downwards in 2006, reflecting the move from a high-inflation environment. ”

BUT

Former Swiss Life Industrial Branch payouts are up 23%; Phoenix Assurance payouts have increased by 13%; Century Life, previously NEL, rose by 1%; and Britannic Assurance Industrial Branch payouts are up 12%.