Poor Performing Endowment

money2

I have a stock market linked endowment maturing this year after 25 years but its performance has been abysmal. For example last year I paid in £500 but the value only increased by £50. The bank lost me £450 maybe even more.
Now with this recent banking scandal I dread to think what they have done with this years money and what the endowment will be worth at maturity. The bank is not Barclays but it is one associated with the interest rate fixing.
After 24 years the endowment is down by 61% against target.
I know that stocks can go down but I believe the bank's performance is well under par considering the period involved.
Any comments please.

armour

why did you keep the endowment going ( I mean paying good money into it) all these years?

dunstonh

For example last year I paid in £500 but the value only increased by £50.

That doesnt make it poor performing.

There was a stockmarket crash in the middle of the year and the markets ended the calender year down.

Now with this recent banking scandal I dread to think what they have done with this years money

that isnt how it works

I know that stocks can go down but I believe the bank's performance is well under par considering the period involved.

Endowments are issued by life assurance companies. Not banks.

RenovationMan

You must have had letters for years telling you that your endowment was underperforming, I know that we did over a long period of time.

I did the sums and realised that I was better off cashing in the endowment and overpaying onto the mortgage, so that's exactly what I did. This was before the stockmarket crash and recession and I did ok out of it.

I think people need to take more responsibility for their own money instead of blaming others. If you have your money in a poor performing product, then do some research and move it. I used this approach on my endowment and paid off the part of the mortgage that it covered in just 16 months instead of the 12 years that were remaining on the endowment. I used this approach on my personal pension and I'm making a profit from the stockmarket crash, not a loss.

It doesn't take much time and effort to learn about financial products and it's certainly worth it.

bigadaj

Not defending eh OP here but the financial industry has much to answer to for endowments on mortgages. People bought the product on the basis that it would pay off the mortgage at the end of the policy, suitably caveated legally but explained during the sales talk that this was basically guaranteed. Money then disappears into a black bod for the professionals to take their fees and not perform and the borrower then gets a letter saying, sorry we were wrong.

This obviously doesn't apply to all financial professionals but the amazing thing is that people still have any trust In any financial institution, though that seems to be hanging by a thread after libor and the interest rate swaps debacles.

dunstonh

Not defending eh OP here but the financial industry has much to answer to for endowments on mortgages.

If you want to compare it to the car industry, then Endowments were the Austin 7 and did a good job in their day. However, time moved on but the product didnt.

People bought the product on the basis that it would pay off the mortgage at the end of the policy, suitably caveated legally but explained during the sales talk that this was basically guaranteed.

More endowments paid off the mortgages and paid big surpluses than those that did not. The problem was that for decades, they continued to pay out surpluses and like any risk that is taken where you dont see the risk event occurring, complacency sets in and the risks become understated. That goes for any walk of life.

Money then disappears into a black bod for the professionals to take their fees and not perform and the borrower then gets a letter saying, sorry we were wrong.

Performance is relative to the area being invested in. The individuals actually have very little sway on the returns.

This obviously doesn't apply to all financial professionals but the amazing thing is that people still have any trust In any financial institution, though that seems to be hanging by a thread after libor and the interest rate swaps debacles.

There was a survey published in one of the pink papers that showed that across the board, every financial profession except IFAs had taken a big drop in consumer confidence. IFAs seems to have avoided it. Perhaps as the action taken to sort out adviser issues started many years ago and has been improving year on year ever since (just 1% of complaints at the FOS are about IFAs despite them dominating the regulated retail distribution channel). Banks were slaughtered in the survey unsurprisingly. Another recent stat from the FOS showed that for PPI, only 0.2% of complaints were about advised PPI. It would be a shame for the good parts of the industry to be tarnished with the bad.

money2

Thank you for all the comments.
To clarify a few points. Firstly of course the endowment is with an assurance company but it was offered by the bank at the time and the assurance company who currently administers the policy is owned by the bank. This was one of two endowments, the other has matured recently and although was down, has performed satisfactorily, producing a shortfall of about 10%. It was with a different company which is independent and a major player in the market.
Both companies issued warning letters over the recent years and indicated possible returns. Only the independent achieved the range it suggested. The other company owned by a bank didn't get any where near.
I probably made the mistake in trusting the companies and although I did take steps to reduce my mortagage by converting more to a repayment basis, this was based on the guide figures supplied. Am I being cynical, but why two different companies produce completely different results especially when one is associated with a bank, it makes me suspicious. Both endowments were based on the stock market. I suspect that the bank one has not achieved good results over the majority of its term not just in the last few years, but the advisory letters always suggested a better return at maturity so as I said I remained trustul. Anyway it is too late now, just dreading receiving the final figure in a couple of months time.

opinions4u

Am I being cynical

Yes. But I understand why somebody would be.

but why two different companies produce completely different results especially when one is associated with a bank, it makes me suspicious.

In a with profits fund a plc can cream off 10% of those profits for shareholders. In all funds, only charging differentials can make different amounts of money for the provider.

Both endowments were based on the stock market.

What, the same stock market? I doubt it. Both funds had a range of investments across the planet. Both funds were managed by different people. Both funds will have had different underlying assets hence different returns.

An additional issue is early in the last decade with profits funds were forced to switch parts of their investments from medium risk equities to lower risk gilts etc. This reduced returns and dividend income just as the markets hit a low. Policy holders missed out on the benefits of a significant stock market boom as a result.

I suspect that the bank one has not achieved good results over the majority of its term not just in the last few years, but the advisory letters always suggested a better return at maturity

Again, ask about regulation. The advisory letters had to include a set of mandatory forecasts. This was the same across the industry. But a forecast is just that. Even Michael Fish didn't always get it right.

Different providers. Different range of funds. Different fund managers. Different charging structures. Different results.