Standard Life Endowment. Help Please!!

dunstonh

The same was on 24.5K but they have send me letter for the last 10 years telling me it will not achieve it's value.

Even policies that have given a surplus have done that. There was a high profile case last year of a maturity notice issued 3 months before maturity showing a shortfall but the maturity value when received was significantly in surplus. Most IFAs have seen similar too. SL projections are just so unreliable. At least the 4% projection doesnt show a lower value than the current position any more. Although it is artificially increased and still unrealistic.

EdInvestor

JoeK wrote: »

The most sensible thing I've seen you to write.

JoeK

This comment is an indicator of how rare it is that the life cover aspect makes a serious difference for endowment policyholders. Obviously if it is an important aspect, I mention it. :rolleyes:

Many policyholders will have in fact been missold on the basis of signing up for unnecessary life cover at a time when they were single and didn't need it - or already had more than adequate insurance via their job.

Very occasionally you do find people like Sarah who have had a serious health event since the endowment was taken out,so the life cover (albeit for a small amount) may be valuable. But it's only occasional.

For most people it's not a major issue, especially as it the cost of new life cover is very cheap these days.

ChrissyR_2

dunstonh wrote: »

Even policies that have given a surplus have done that. There was a high profile case last year of a maturity notice issued 3 months before maturity showing a shortfall but the maturity value when received was significantly in surplus. Most IFAs have seen similar too. SL projections are just so unreliable. At least the 4% projection doesnt show a lower value than the current position any more. Although it is artificially increased and still unrealistic.

Dunston, is this SL only or are other companies similar?

From your description it seems that it's a case of 'we actually have no idea what the you will get until it happens but the computer model has pumped out some random figures so we though we would send you them on some headed paper because you asked' :rolleyes:

I've just got some 'projections' from Legal and General and your post worries me. All throughout their letter and figures there are so many caveats (some understandable but others just suggesting 'cluelessness').

dunstonh

Dunston, is this SL only or are other companies similar?

Most projections from the providers do not include the terminal bonus. So, if the plan has a terminal bonus on it, particulary a good one, then the projection could be quite inaccurate.

Standard Life had the worst reputation. Indeed, we saw many examples posted here where the lower projection figure gave a figure that was lower than the basic sum assured plus annual bonuses (the guarnateed minimum). That is not technically possible. Once that got out, they amended the projection figures for the lower one not to show less than the current minimum but that often meant that lower and middle projections were the same. The projection rates used have increased a bit so you dont see the figures as low so much now but they are still inaccurate.

I've just got some 'projections' from Legal and General and your post worries me. All throughout their letter and figures there are so many caveats (some understandable but others just suggesting 'cluelessness').

L&G would be missing the terminal bonus in their projections but that would be the only thing. However, L&G have good potential for decent terminal bonuses.

Projections are just examples. That is why they come across a bit wishy washy at times. Even an endowment performing consistently at 10% a year still has to use the same projection rates. An endowment performing on track for a big surplus will often show a shortfall using the standard projections due to flaws in the projection system. Equally the really poor endowments in duff funds with a zero bonus are still showing growth rates which they are unlikely to acheive. So, it can work both ways. Good and bad.

JoeK_3

dunstonh wrote: »

Projections are just examples. That is why they come across a bit wishy washy at times. Even an endowment performing consistently at 10% a year still has to use the same projection rates. An endowment performing on track for a big surplus will often show a shortfall using the standard projections due to flaws in the projection system. Equally the really poor endowments in duff funds with a zero bonus are still showing growth rates which they are unlikely to acheive. So, it can work both ways. Good and bad.

Hopefully, people reading this post will realise that giving advice on surrendering of endowments is an awfully complex issue and should only be handled by a competent Independent Financial Adviser (IFA).

We have heard many points of view regarding having some certainty of paying off the mortgage and to some that makes sense but what is right for one does not always apply for another.

Most people in the UK are grossly under insured and for some the only life cover that they have is the insurance attached to their endowment and to tell these people to surrender is criminal.

We had a poster that said that 'these people will tie you up in knots' and I can only assume that he meant that it was getting complicated and a bit too technical but endowments are technical.

If you want feedback from other people, that's fine, if you want a professional opinion that's good but advice on an endowment policy should always come from an Independent Financial Adviser (IFA)

JoeK

EdInvestor

A useful article in the Scotsman which explains the various reasons your with profits endowment is no longer the product it was when you took it out.

An estimated 20 million savers, who are saving into endowments, life insurance, certain pensions and bonds are still investing in with-profits.
And they remain a massive market, with the Financial Services Authority (FSA) reporting there is more than £400 billion in traditional with-profits funds.
Recently, there has been much concern over with-profits policies, their performance and falling bonus rates......It is not surprising that a lot of advisers believe now is a good time to get out of a with-profits fund....

DH said:

Most projections from the providers do not include the terminal bonus.

However it is easy to check the projections using the surrender value, which does include the terminal bonus. It's more important to get a feeling for how well each particular company's WP fund will perform, and you can only get a feel for that if you know the investment mix.

In Standard Life's case, think 4%.

There may be some exceptional cases where it's worth keeping the endowment for the life cover, but most people just want to pay off their mortgage asap. Those paying 6-7% interest on their loan will be far better served to surrender, reduce the mortgage amount (or offst it) and then use the endowment premium to overpay.They then have a decent chance of meeting any shortfall without increasing their outgoings.

dunstonh

However it is easy to check the projections using the surrender value, which does include the terminal bonus. It's more important to get a feeling for how well each particular company's WP fund will perform, and you can only get a feel for that if you know the investment mix.

In Standard Life's case, think 4%.

The surrender value can also include significant penalties of many thousands of pounds. With SL, NU and Pearl they also have mortgage promise values which may only be a few thousand pounds as well but they are not included in the projections either.

There may be some exceptional cases where it's worth keeping the endowment for the life cover, but most people just want to pay off their mortgage asap.

Critical illness cover in endowments will be of higher quality than current critical illness. Plus the CI cover in the endowments is likely to be cheaper as CI is more expensive today than it was 4 or 5 years ago.

There are too many people holding on to duff endomwents due to making a proper analysis of the endowment and there are far too many decent endowment being sold or surrendered for exactly the same reason. Unless you know all the facts, any decision you make will be based on flawed data.

useful article in the Scotsman which explains the various reasons your with profits endowment is no longer the product it was when you took it out.

Its generic and all it says is get it reviewed. With profits is not what it once was. Today, only really Pru and NU have viable with profits funds. However, a few below that, such as L&G and Std Life, may not have funds which are going to set the world on fire but when you take into account penalties and terminal bonus (and mortgage promise values where applic) then they are more likely to have plans which should be kept and others which are not.

If you surrender a plan with a higher basic sum assured, mortgage promise value and a large terminal bonus you could be losing in excess of £10k. To get that 10k, it may only cost you £5k in remaining premiums so whilst the product may be low quality by todays standards, you need to look a little not just at what you may get back but how much you will lose if you surrender/sell.

Gorgeous_George

Surely, IF the SL plans were so appalling, there would not be a market for 2nd hand policies. AAP recently offered me more than the SL surrender value which suggests to me that the plan is expected to do better than other investments. Otherwise, why would anybody want to buy one?



GG

EdInvestor

Gorgeous_George wrote: »

Surely, IF the SL plans were so appalling, there would not be a market for 2nd hand policies. AAP recently offered me more than the SL surrender value which suggests to me that the plan is expected to do better than other investments. Otherwise, why would anybody want to buy one?



GG

The only people who want to buy endowments these days are German investors, who tend to be very conservative, like guaranteed products and are used to low returns (Euro interest rates are almost always a lot lower than ours).

So the TEP traders can package up these endowments into a fund and flog units to these investors: they are a bit like our guaranteed equity bonds, and just as duff.

SL endowments currently attract a premium of around 5%, not IMHO high enough to indicate they are worth keeping compared with the alternative genuinely guaranteed return of paying off a mortgage or saving the money in the bank.

An endowment involves taking a risk: that you won't be able to pay off your mortgage.You incurred this risk originally in return for a potential reward: that you will get back more than you need to pay off the mortgage, enjoying an additional lump sum.

Most endowments now will not even perform the basic task of paying off the loan, much less provide any extra lump sum.It is best to face facts and consign them to the dustbin of history.

Gorgeous_George

I shall continue to monitor my SL policy monthly.

At present, it is increasing by more than the IR that I could achieve elsewhere and more than my mortgage rate. It also includes a decreasing element of life insurance. Sure, there is some risk but there is also a risk in selling in that it may continue to perform better than some other options.



GG