Happy with endowment maturity value after 25 years

Backbiter

After a long and worrying 25 years, our endowment finally matured last month. We took it out in Nov 1987 to cover a 35k mortgage. It was a 'low-start' endowment, rising from £27 a month to £53 a month after 5 years. The saleswoman convinced us to take out an endowment rather than a repayment mortgage by showing us projections of a £90k maturity value after 25 years. It was with a company called National Mutual of Australasia, but within a couple of years it was taken over by Friends Provident.*

Within a few years we had the red warning letters, and were advised to look at alternative ways of clearing the mortgage, so we switched to a repayment, but kept the policy going. We complained about misselling, but the ombudsman ruled that, as we had suffered no actual loss at the time we switched, we were not entitled to compensation. Had we not switched we would have been entitled to a payout as, at the time we complained, the endowment was showing a shortfall.
So we stuck with it, and last month were surprised that the policy had not just reached its target, but had exceeded it by 10k.
I worked out we had paid around 15k into it over 25 years, so I make that growth of 200% (not to mention the 25 years of joint life insurance). Not the 90k we were told to expect, but still a very welcome sum.

How does that growth compare with other maturity values with other companies?

*When Friends Prov demutualised in the 90s and paid out thousands in shares to its policy holders, we were told we didn't qualify because we took our policy out with a company that ' was not a mutual society'. Our original policy documents proved that NM of Australasia WAS a mutual, so that was a blatant lie, so we complained but got nowhere, and were sorely tempted to cash the policy in in disgust. We're glad we didn't now.

silvercar

We had one of those low starts with increasing premiums with Legal and general. It matured in May 2011 and paid 98.5% of the mortgage. So not as terrible as it could have been (or as bad as the one due to mature next year that is "unitised" and currently forecast to pay out only 60% of the mortgage).

dunstonh

So we stuck with it, and last month were surprised that the policy had not just reached its target, but had exceeded it by 10k.

I'm less surprised than you. One of the problems with old endowments was that they were never designed to give ongoing projections from mid term. So, when the FSA told providers to do it a number of providers had to fudge their systems and issue figures which could quite heavily understate the likely returns. Often by projecting from the surrender value rather than current value or projecting without including the terminal bonus accrued to date. You frequently saw projections from some providers that were not possible (for example, Standard Life would often see projections that were lower than the guaranteed minimum maturity value - something not possible).

Another thing that would happen is that the projection rates would assume x% a year on a level basis. Returns dont work like that. Particularly old conventional with profits plans. They tended to bump up quickly at the end whilst looking rather poor in the middle. I have seen 6 month to go maturity notices indicate a shortfall (by some way) but the actual maturity exceed target. Also, the projection rate was not x% net of charges but x% gross of charges. So, a fund returning 5% pa net would equate to something like 7% on the projections. Yet the projections used for the red/amber/greed typically used lower assumptions (which is fair enough and sensible but helpful if some context was given for those that didnt know how they worked - ie. most people).

Whilst many endowments did go off the boil, I suspect a good number were cashed in early based on inaccurate assumptions.

*When Friends Prov demutualised in the 90s and paid out thousands in shares to its policy holders, we were told we didn't qualify because we took our policy out with a company that ' was not a mutual society'. Our original policy documents proved that NM of Australasia WAS a mutual, so that was a blatant lie, so we complained but got nowhere, and were sorely tempted to cash the policy in in disgust. We're glad we didn't now.

That would be because they only bought the UK Life book and not the whole company. So, in effect it never demutualised. The mutual continued to be a mutual and carried on trading as such.

dunstonh

We had one of those low starts with increasing premiums with Legal and general. It matured in May 2011 and paid 98.5% of the mortgage.

Low start endowments were typically poor value. You paid in more over the term and got less back than a level premium one. Interesting yours came that close. Had it been level then it would almost certainly have hit target.

JustLikeThat

I am cautiously heartened by the 98.5% payout for the L&G endowment policy. My own L&G low-cost/with profits policy matures in 4 or 5 months time (mostly paid £63.90 per month for £34,500 mortgage). Estimates received gave more like 70-ish% expected.

Francis63

Backbiter wrote: »

After a long and worrying 25 years, our endowment finally matured last month. We took it out in Nov 1987 to cover a 35k mortgage. It was a 'low-start' endowment, rising from £27 a month to £53 a month after 5 years. The saleswoman convinced us to take out an endowment rather than a repayment mortgage by showing us projections of a £90k maturity value after 25 years. It was with a company called National Mutual of Australasia, but within a couple of years it was taken over by Friends Provident.*.......

.......
So we stuck with it, and last month were surprised that the policy had not just reached its target, but had exceeded it by 10k.
I worked out we had paid around 15k into it over 25 years, so I make that growth of 200% (not to mention the 25 years of joint life insurance). Not the 90k we were told to expect, but still a very welcome sum.

How does that growth compare with other maturity values with other companies?

That's very iteresting. I had the same low start endowment with Friends Provident, taken out just a few months before yours (Aug 87).

I have today found out that it matured last year. I have had no notification, and called today as I wondered why the £71 per month payment had stopped coming out of my account. I thought it was due to mature this August. FP say they they didn't have my address.

However my mortage was for £50,000 and I have just been told the payout is only £37,330.62! A shortfall of nearly £13,000! (Not to mention the predicted £20,000+ in bonuses).

I can't understand how our outcomes are so different. I'm so upset by this I don't know what to do next.

Any ideas greatly appreciated.

Amanda65

I've just received a valuation on our endowment, due to mature in September, which was set to repay £73k and yesterday was valued at £78.5K! Now pondering what to do and waiting on further figures. Just grateful that we weren't in a position to increase our repayments and sat tight (althoguh do realise it could go down again before then, hence the pindering!). At one point we were told we needed to increase our monthly payments from £100.49 to £354 to reach target, which would have crippled us.

It was originally with a company called Regency Life, which then became Aegon, then Windsor Life and are now Re-assure!!!

Froggitt

Backbiter wrote: »

Within a few years we had the red warning letters......... the endowment was showing a shortfall. So we stuck with it, and last month were surprised that the policy had not just reached its target, but had exceeded it by 10k.

As policies have paid in general bonuses of maybe 1% or 2% over the past 15 years or so, I find it hard to believe that it would go from shortfall to a 10k excess.

Froggitt

Amanda65 wrote: »

I've just received a valuation on our endowment, due to mature in September, which was set to repay £73k and yesterday was valued at £78.5K! Now pondering what to do and waiting on further figures. Just grateful that we weren't in a position to increase our repayments and sat tight (althoguh do realise it could go down again before then, hence the pindering!). At one point we were told we needed to increase our monthly payments from £100.49 to £354 to reach target, which would have crippled us.

It was originally with a company called Regency Life, which then became Aegon, then Windsor Life and are now Re-assure!!!

http://www.thisismoney.co.uk/money/pensions/article-2138023/How-dead-insurance-funds-holding-life-savings-months-end.html

A so called Zombie fund, usually characterised by moving into bonds and cash, leading to low but low risk returns.

Am I in a parallel universe?

Francis63

It seems it"s just me that's got an absolutely rubbish deal then over the last 25 years and everyone else is doing ok, or more than ok in some cases.

How can that be?

kingstreet

Froggitt wrote: »

http://www.thisismoney.co.uk/money/pensions/article-2138023/How-dead-insurance-funds-holding-life-savings-months-end.html

A so called Zombie fund, usually characterised by moving into bonds and cash, leading to low but low risk returns.

Am I in a parallel universe?

Different kind of fund.

This is a unit linked endowment, probably invested in a managed fund - a combination of equities, gilts a bit of commercial property and cash.