Poor Performing Endownment and Promise

bloolagoon

I have a poorly performing endownment, in fact in the last 12 months only £128 was added to the value (despite paying £82 a month). I have other endownments that are also not performing just that they are not this underperforming.

The plan is due to mature in 2019 and we were considering cashing in the endownment as the growth per investment is low but we do have a "promise" by standard life.

Can anyone advise what this promise means in laymans terms and also if cashing in an endownment this late in term is indavisable or does this require specialist advice?

We also have 2 other endownments ending on the same month in 2019 and they are also very much underforming too but had some growth this year.

dunstonh

I have a poorly performing endownment, in fact in the last 12 months only £128 was added to the value (despite paying £82 a month).

That doesnt make it poorly performing (in isolation). The last 12 months has been a negative period on the markets.

Can anyone advise what this promise means in laymans terms and also if cashing in an endownment this late in term is indavisable or does this require specialist advice?

If the endowment falls short at maturity, then they will add an amount to the maturity value. This figure is dependent on future returns. Std Life will supply the MEP value range to match the projections on the statement.

We also have 2 other endownments ending on the same month in 2019 and they are also very much underforming too but had some growth this year.

Are the statements all on the same date? For example, July/Aug last year there was a 20% market crash. The last 2 months have seen a decline as well. So, if the statements are produced at different times, you would expect the impact of market movements to be different.

bloolagoon

The statements are at different times of the year, many thanks for the explanation of why the growth "appears" different with the others.

Situation with this policy is the following. Current value is £15,125 - initial value to cover mortgage was £37,500. Growth at lower rate is £24,600. I really can not comprehend how it can make nearly £10K in under 7 years.

Their MEP says it is estimated between £2,500 and £3,750 - depending on growth and may alterntively be zero. Is this figure part of the "lower growth" prediction above or is this additional?

dunstonh

The statements are at different times of the year, many thanks for the explanation of why the growth "appears" different with the others.

Chances are they are all poor performing The real problem with performance is that the 90s had very few negative periods. On monthly contributions these short term negative periods can be very beneficial as the recoveries that follow see the investments bought cheap make the most growth. What followed the 90s was the dot.com crash (and other related events) that saw a 43% drop in the markets. A drop of that scale is typically once in a generation (a more typical stockmarket crash is 20-25%). Then just as that recovered along came a second one with the global recession/credit crunch and we havent seen the full recovery on that one yet. Ironically, those that started their endowments in the late 90s, early 2000s and are unit linked, they could do very nicely long term. However, those that started in the early 90s or earlier have really suffered (as they saw it go up steadily and then wham, two big drops with little or no time left to recover before maturity)

Situation with this policy is the following. Current value is £15,125 - initial value to cover mortgage was £37,500. Growth at lower rate is £24,600. I really can not comprehend how it can make nearly £10K in under 7 years.

Actually, it is possible from the current position. It really depends on how long this economic cycle takes to see itself out. It is safer to go by the lower figure. However, look at it like this... if you were on a market high and got a statement you would use the lower figure. If you were on a market low after a drop, would you still use that lower figure? With investments you never know future returns. You could get less or more. So, you cant say what you will get. So, using the lower figure in the projections is usually sensible. However, after a drop has occurred, the "potential" for higher growth to be achieved then exists.

Their MEP says it is estimated between £2,500 and £3,750 - depending on growth and may alterntively be zero. Is this figure part of the "lower growth" prediction above or is this additional?

It is not included in the projection. You nee to add it on to those projection figures.