Endowment maturity vs last projection

eaustin

I have just received a letter from Prudential stating my plan will mature with a value of £29,356. However, the last projection indicated the following:

Jan-12 assumed growth 6%/8%, projected amount £29,400/£30,100

Looking at the rise in the FTSE between Jan-12 and Jan-13 I estimate it to be more than 10% and since January it has continues to rise.

My question is in Jan-12 their projected amount based on 8% growth was £30,100. The final settlement is closer to their projection based on a 6% growth whereas it would seem that growth of 10%+ could have been achieved.

Is it worth challenging this or does it just suggest that Prudential's investments performed worse than the FTSE (I would have expected their performance to closely mirror the FTSE 100)

holly_hobby

The estimated growth rates in illustrations and EMVs, are industry generic and set by the FSA - to which they are just that, an estimate of return NOT a guarantee - which won't be known until maturity.

Is this a With Profits or Unit Linked policy ?

Have you obtained a recent surrender value - that wil give you a better indication of how your policy is actually doing to date.

Hope this helps

Holly

eaustin

Thanks Holly.

I realise they were estimates, my question was based around the fact that the final maturity figure (i.e. not surrender value as the term has been completed) was significantly lower than their last estimate just 12 months ago based on 8% growth when all indicators are that growth has been better than that.

It was a with profits policy.

holly_hobby

What indiciators are you referring to ?

As I say, an estimated growth rate of 8%, is one of the 3 assumptive FSA prescribed growth rates that any illustration/projection is based on, and as you can see sadly did not reflect the true performance of the policy (as a point of interest, did your maturity value inc the addition of a Terminal Bonus ?)

Holly

y002cjw

I have seen similar posts to this and also read similar letters in the newspapers, particularly the mail / mail on sunday / thisismoney.

100% you should contact them.

As I recall these can sometimes be clerical errors. But when challenged they sometimes 'honour' the better figures or offer compensation.

I do recall this often happens with pensions quotes towards the end of maturity.

But I would definitely contact them and ask for them to reply in writing explaining how they arrived at the figures on both occasions.

eaustin

The 'indicators' are my general understanding of investment returns since Jan-12 when Prudential provided their projections as they are require to by the FSA. I am 'surprised' that they only appear to have generated a 6% return since that date.

The maturity value includes the assured sum, regular bonus and final bonus.

bigadaj

By all means query it, but remember endowments are by their nature varied and spread. Only a portion will be invested in equities, it will also be in bonds, cash, property etc, so returns will be lower than the headline equity growth. Also endowments are meant to be smoothed, so good times pay for bad times and vice versa.

I never saw any justification in putting my money into a black box and trusting someone to manage it with no guidance, allocation etc but everyone is different.

eaustin

Hindsight is a wonderful thing. When I took out my mortgage as a 'youngster' endowment mortgages were sold as the 'norm'. Of course I would never do so again, as soon as I realised there was projected shortfall I made alternative arrangements to pay off my mortgage.

Is there a way of finding out what there average returns have been over the last year?

holly_hobby

Contact the provider directly and ask them.

Unfortunately, low cost endowments hold no gte of returns at maturity(other than basic sum assured) - and whilst disappointing it is what it is I'm afraid.

You were also fortunate to receive a terminal bonus , which given that most providers have not awarded TBs for a while, is a positive (however small !).

As I say, the illustrations you recd last yr were based on industry wide prescribed projection rates, and therefore could not be too strongly relied upon, if you have achieved around a 6% growth thats actually pretty good, given what other providers policies have netted (which I know doesn't change things but may help with some perspective).

As I say contact the provider directly, voice your concerns and ask for their comments.

Hope this helps

Holly

eaustin

I have contacted my provider with my query and await their reply. Thanks for your replies.