Predicted mortgage shortfall

gk172

Help please i dont know what to do now, we recieved a letter in from Standard Life this morning stating our endowment plan is projecting a short fall of 50% so effectivley come 2016 we will a shortfall of 21000 so our loan of £36,000 - payout £15000, pecentage might be out not sure if that a figure for £30,000 or £36000 as 30 was the original figure but either way we are looking at £15000 minimum short fall and dont know if theres anything we can do or anybody to speak to. Can anyone here recomend best course to go? PLEASE.

dunstonh

Ask Standard Life to verify the figures as 50% shortfall is massive.

It would be worth investigating if the policy gets a higher allocation rate later in its life. These can often be 102-105% allocation of premium. These are never included in the projections. The surrender value, guaranteed sum assured and current bonuses should be reviewed to see what they currently stand at and then a proper assesment can be made rather than guesses.

See other recent posts on standard life endowments for more info.

EdInvestor

Hello gk


Don't panic

First of all, is this a With-profits or a unit-linked endowment ?


If it's the former can you provide some figures so we can see what's going on here:

1.What is the value of the Guaranteed sum assured and declared attaching bonuses so far?

2.What amount (or percentage) of the total policy value is the terminal bonus component? What is the current surrender value (you might need to ring up and ask for these two)

3.What's your monthly premium and date of maturity of the policy?


If it's unit-linked, what fund is it invested in?


I agree that a 50% shortfall sounds excessive.

Compensationitis

This policy could not possibly meet your expectations, if you understood the risks you can't complain about that but you can complain that they used 'inappropriate charges' to set the premium AND they misrepresented the risk in the documentation, assuming it is an MC80 plan of course.

gk172

Thanks for your replies ive just dug out what came through, first we have 3 policies of which 2 have been given red alert - high risk of shortfall and another which is green letter - plan on track.

Policy 1 £30000 started 8.4.92 matures 8.4.2017 with payments of £38.58 a month and seems to be a life with profits fund and the profits are running at 2% a year with life cover of £30000. Total Value(cashed in) to date is £6753.69 and what is stating i might get back is low rate £14300, intermediate 17000 and high rate 20100. So best case senario is we will be £9900 short.

Policy 2 £2160 started 28.05.1995 matures 28.05.2017 with payments of £10.11 again a life with profits and running at 2% with life cover for £2160, Total value (cashed in) £1115.63, and the plan is projected to be worth low rate £2840, intermediate £3310 and high rate £3860 so that should cover a small bit if best case scenario come but will cover the loan that was taken.

Policy 3 £4000 started 19.04.1996 matures 19.04.2017 with payments of £10.64 same life with profits and same cover £4000, Total value (cash in) £1016.42 and plan projection is low rate £2720, intermediate £3170 and high rate £3690 but i think policy 2s hopefull over payment will counteract the loss from policy 3 so really looking at policy 1. It also states on back page asking do i have a valid complaint and if so i should act before 6 may 2007 or i would loose right to complain and supposedley enclosed is a fsa factsheet telling me how to which was never enclosed so i guess best action is to call and get one of those and try and complain about policy 1.

EdInvestor

Hi gk

You don't say, but I imagine there is no terminal bonus left in these policies, thus you may as well wait for the demutualisation bonus before surrendering them. Are you married? If so, and your spouse is not named as the first owner of one of the policies, then you might like to make that change, as this will mean you will get two flat rate windfalls, as each member gets one - an extra 500 quid probably

Do you need the life assurance included in these policies? If so, replace it before you surrender the policies.Equally, start off any misselling complaint before surrendering.

Now what to do about the mortgage shortfall?

You really should start to tackle that now. You can

1)Start overpaying your existing mortgage
2)Start looking around for a remortgage deal from an I/O to a repayment mortgage which will allow you to pay in the endowment proceeds next year without penalty

This thread might be useful.

AFAIK 25k is the minimum mortage amount, so you will probably need to move to a new mortgage in advance of junking the endowments.

Good luck.Keep your fingers crossed for a good windfall

gk172

Editor wrote:

Hi gk

You don't say, but I imagine there is no terminal bonus left in these policies, thus you may as well wait for the demutualisation bonus before surrendering them. Are you married? If so, and your spouse is not named as the first owner of one of the policies, then you might like to make that change, as this will mean you will get two flat rate windfalls, as each member gets one - an extra 500 quid probably

Do you need the life assurance included in these policies? If so, replace it before you surrender the policies.Equally, start off any misselling complaint before surrendering.

Now what to do about the mortgage shortfall?

You really should start to tackle that now. You can

1)Start overpaying your existing mortgage
2)Start looking around for a remortgage deal from an I/O to a repayment mortgage which will allow you to pay in the endowment proceeds next year without penalty

This thread might be useful.

AFAIK 25k is the minimum mortage amount, so you will probably need to move to a new mortgage in advance of junking the endowments.

Good luck.Keep your fingers crossed for a good windfall

Yes im married and in all 3 policies hubbys name comes first and the letter about demutualising states one per person so one payout and when that comes its going to the mortgage, like wise if there is any compensation to come, also we talked about what we want to do regarding the short fall taking the worst case, were looking to split it to 15 interest only and 15 repayment so hopefully when the 12 years end comes if the plan has done bad things should be covered and if the plan does good we might be lucky. we want to keep the length and not extend our mortgage so paying £15000 over 12 years might stretch us a bit. Also we are not cashing in the policy whatever happens it will still run.

Just if i may ask for any help regarding what to say regarding complaining and what paperwork do we need if any? We were told at the time it would more than cover the loan and with a few thousand left over which aint happening, so is it just a letter of complaint to standard life? and does anyone know roughly what to say?

Compensationitis

Editor said: "but I imagine there is no terminal bonus left in these policies"

Where did you get that idea from?

EdInvestor

Hi Evan

Compensationitis wrote:

Editor said: "but I imagine there is no terminal bonus left in these policies"

Where did you get that idea from?

Money Managements's last survey reported zero TBs left in 10-year endowments and a negligible amount in 15 year ones and it's got worse since then.Standard L ife makes no secret of it.There's plenty of anecdotal evidence about from other members as well. I didn't think it was worth GK's time bothering to check really.

Do tell if you've managed to find some hidden TB money somewhere - we'd all be delighted

Compensationitis

I missed the term, yes anything shorter than 15 years is struggling to say the least.

dunstonh

15 years or less on an endowment was foolish anyway. Although lots were done.

20-25 years should still have a fair terminal bonus although much down on what it was a few years ago. Projections do not work with endowments of that term because of the missing terminal bonus.