Endowment update: payouts still falling

toonfish

SloppySaver wrote: »

Sounds to me like Mr. Dunston here has sold many endowments in his time and so if he starts to deride them now a few old clients may come out of the woodwork with miss-selling claims.

Keep your gloves up Dunston, you're on the ropes!

or perhaps he actually knows what he is talking about, rather than the average "Mail on Sunday" financial adviser?

jamesd

Yes, it has. It has the advantage that you can see what is happening instead of relying on a terminal bonus that you can't really see or do anything about.

Mr_helpful

"
Yes, it has. It has the advantage that you can see what is happening instead of relying on a terminal bonus that you can't really see or do anything about."

Cant disagree there. You can see in real time your money disappearing as the stock market collapses causing people to lose confidence and sell while making a loss. When the FTSE halved its value a few years back mani ISA's followed suit. Just the same as endowment funds shrunk over the same period. Im not in particular favour of either as I have had both (still got the ISA used endowment to completely pay off mortgage) These days I do my own shares as well
What I am trying to say is that at various times each has its merrits and yes the endowment is more of a tractor than a sports car but that aint bad in a ploughed field.

jamesd

Why do you prefer the endowment compared to switching more of the money into funds with lower volatility, like commerical property and corporate bonds? If you want to emulate an endowment it's easy enough - just stick half of the money into those types of fund and rebalance the percentage split each year to keep it the same.

dunstonh

Sounds to me like Mr. Dunston here has sold many endowments in his time and so if he starts to deride them now a few old clients may come out of the woodwork with miss-selling claims.

I sold about 5 endomwents in my career. Not one complaint and all are on track to pay surplus (thanks to using a 4.4% target growth rate and unit linked funds invested in a spread).

I have said many times before that the product is obsolete and if there are better alternatives to move to and the costs are right, then you should move. However, I see little point of slagging off the product or people that sold them based on information we know today that we didnt know in the past. It's better to know how and why they failed and in some cases, there is easily fingers to be pointed but a lot of it is hindsight.

One thing we can say is that even if your endowment is in shortfall, you are financially better off than you would have been had the old economy remained suitable for all endowments to hit target. You may have got a surplus but you would have been worse off.

Please refer the rest of us to some documentary evidence that backs up this claim. The endowment problem is not now, per se, it's 10-15 years in the future when these policies mature and fail to provide returns to pay off the mortgage they are meant to be covering.

In 2005, 100% of Pru maturities hit target and paid an average surplus of £2,200. In 2006, 100% of Pru maturites hit target and the average surplus increased to £3,300. Trend is upwards. Unit linked endowments from most providers are seeing big increases in values over the last 4 years as the stockmarket recovers. The rates typically being more than double what is shown on the projections.

Please refer the rest of us to some documentary evidence that backs up this claim. The endowment problem is not now, per se, it's 10-15 years in the future when these policies mature and fail to provide returns to pay off the mortgage they are meant to be covering.

You havent relied an any evidence on making your comments. Others have posted a number of the reasons. Another reason to add to the list is that endowments were priced to work in a boom/bust economy with typically high inflation (inflation already mentioned). The move to a stable, lower inflation economy made the plans poor value by todays standards.

A bad endowment is likely to remain bad. However, a good endowment is worth keeping. A lot of these media articles focus on the bad and make no mention of the good. It is important to know which are good and which are bad rather than assume they are all bad.

Mr_helpful

I dont prefer the endowment but if you have one already you have paid for it upfront in the majority of cases. Just in the same way you pay more capital at the end of a repayment mortgage and endowment tends to grow faster nearer the end So why cash in the high growth period before it happens. Most people dont like doing their own investments otherwise there would be little demand for collective investments. Over period of time these investments do change with tax breaks etc but underneath it all is often the same fund management team.

MUSTBEFUNNY_2

The man in the street pays into an endowment. Whatever, you say - the result is that he will be lucky to get back what we paid in, let alone any (even paultry) interest. So where has the money gone? I think the answer lies in the book Rich Dad's "Who took MY Money?" (Why Slow Investors Lose and Fast investors win.) Because you can dress it up whatever way you like but somebody else got that money and it wasn't the man in the street. Yes I would rather trust Harold Shipman than a financial advisor now you mention it:rotfl:

Mr_helpful

Who made the money out of Rich Dad Poor Dad? Publishers and author by any chance. You dont think you were conned by a good motivational writer. Have you read prophecy by same author?

toonfish

MUSTBEFUNNY wrote: »

The man in the street pays into an endowment. Whatever, you say - the result is that he will be lucky to get back what we paid in, let alone any (even paultry) interest.

do you have any evidence for this?

dunstonh

One of the advantages of being self employed is that I dont have to deal with small, closed minded individuals who think everything they read in the Daily Mail is real.

There is no point discussing/debating the issue with someone who doesnt know anything about it, doesnt want to know anything about it but wants to tell everyone else what they think about it. I smell a troll.