Standard Life Endowment. Help Please!!

JoeK_3

Sorry but there a two IFA's on this site who regularly comment about endowment policies.

It would seem to me that we are both competent and capable of understanding how all endowment policies work and we are not frightened of commenting accordingly.

What I cannot understand is why people do not listen to the recommendation that we give. I have been in the financial services industry since 1984 and one of the dying breed of IFA's and in my four months of being on this site I have seen nothing but attacking financial advisers.

I have followed certain individuals recommendations to trash their endowments in 90% of all, "what shall I do with my endowment" cases.

Is that right?

Endowments are long term investment vehicles that reflect investment returns over that period. During the long term investment will have their ups and downs and we have just gone through the worst and longest stock market crash in history. As we come out of that recovery, we will see improving investment returns that will average out over a 25-year period.

When do we trash the endowment? at the top of a cycle or at the bottom?

This is not about the endowment but about the insurance company behind it!
What investment returns are they performing at?
What is the financial strength of the company?
What is the with profits mix?
What does the future hold?

I have seen repeated recommendations on this forum to either sell or surrender both Prudential and Norwich Union with profits endowments but the reality of this is that they are both performing well and the financial strength of the companies cannot be questioned.

If I have gone in a bit hard on certain individuals on this thread, I apologize but it's only been necessary because they do not want to listen to words that are given out by the only people that are qualified.

JoeK

Crazy_Saver

JoeK wrote: »

Sorry but there a two IFA's on this site who regularly comment about endowment policies.

It would seem to me that we are both competent and capable of understanding how all endowment policies work and we are not frightened of commenting accordingly.

JoeK

I would like to back you up on this Joek.

I am one the regular posters on this site who is trying to sort out a £32k shortfall on a £60k mortgage. The qualified IFAs on this site have all been very honest with me, and contrary to popular opinion, they have all agreed that "yes this is a dud and the best thing I could do is sell/surrender".

I'm sorry Ed if this seems to go against your opinion but I have to be honest and say that if a policy really is a "dud" the IFA's such as Dunston, Mrhelpful and Joek don't try and deny a mis-sale, instead they offer advice on how to make the best of the situation.

I also appreciate the help from other posters such as Ed, Vinno and DOTW. They do seem to have an insight into many of the problems we novices face when dealing with complaints.

Originally posted by catsneel.
Think i'd better quit on this one, i think you're all a bit touchy, sqwabble between each other, trying to get even with each other,
Sorry i asked for advise in the first place.
BYEEE

Hi catsneel. Opinions on here can seem to be a bit harsh(I've had many a slapped wrist!), but don't forget the IFA's on here are just trying to give straightforward advice without knowing any history. They don't know if the posters are genuine (many aren't) so sometimes they are understandably cautious.

I have to say that the majority of the advice I have received on these boards has been spot on and has given me the help needed to fight my claim all the way through to what is now nearing the end.

A big thanks to everyone that takes the time to just help:beer:

Regards

Crazy Saver

EdInvestor

Crazy_Saver wrote: »

The qualified IFAs on this site have all been very honest with me, and contrary to popular opinion, they have all agreed that "yes this is a dud and the best thing I could do is sell/surrender".

Certainly it is the case that dunstonh and I have regularly agreed on what should be done with cetrtain endowments.

I'm sorry Ed if this seems to go against your opinion but I have to be honest and say that if a policy really is a "dud" the IFA's such as Dunston, Mrhelpful and Joek don't try and deny a mis-sale, instead they offer advice on how to make the best of the situation.

I didn't say they did

What I cannot understand is why people do not listen to the recommendation that we give.

Actually I'd say they do listen, but you may be missing a few important points

1) In the case of many endowments there is no hope of recovery, because the investment mix has changed massively and will never go back to what it was originally as it's a regulatory change to reduce risk.Partly as a result, With-profits products have become discredited and the market has basically collapsed with many companies closing to new business.Returns are very poor.

2) The switch to the low inflation environment, where 6% returns are likely will severely hit the performance of endowments which needed double digit returns to pay off the mortgage, that is quite a few of them . Do you expect a return to a high inflation (double digit) environment? If you don't then this will not right itself either.

3. Interest rates are now at much the same level as what you can expect in returns from the endowment so there is no "risk premium" in the endowments any more - you can get the same return by paying off your mortgage, except it's actually guaranteed

4.The price of life cover has come down a lot in recent years so it's very cheap for most people to replace it. In addition the mortgage market has become much more sophisticated, with much better alternative products.Where people want a risk-based product a modern ISA with quality unit trusts inside will have lower charges and no tax,is likely to be a better bet.

5. Many people took on endowments because they thought they would definitely pay off the mortgage and produce something extra.Now it appears the policies will struggle to pay off the mortgage.The nature of the risk has changed - instead of gambling with a view to getting a new car or a cruise, people are gambling with being able to pay off their home.

They don't want this.It wasn't the original idea and it's stressful.So if they can dump the endowment and pay off the mortgage without losing anything, or with only a small increase in outgoings , that's what they will usually do, so as to be secure.

I don't set out to "trash endowments". As soon as you look at the figures, and compare with the alternatives, in most cases it's quite obvious there are better alternatives.

There are exceptions of course, such as: old endowments which benefited from tax relief pre 1984, policies with some of the smaller mutuals, some older policies with very high guaranteeed values, situations where people have health issues and can't get replacement life assurance, situations involving people on benefits, etc etc.

All these have popped up in the past on MSE and the view has been to hold the endowment.

The picture is not nearly as black and white as Joek claims.If he had joined this site three years ago, rather than 6 months ago, one suspects he might have a clearer perspective.

Gorgeous_George

The problem, IMO, is that people do not want advice. They want to know what the future holds and would be better off paying a seaside fortune-teller.There is loads of great advice on here. Read it and make your decision.:)GG

EdInvestor

Gorgeous_George wrote: »

The problem, IMO, is that people do not want advice. They want to know what the future holds..

This is one of the points I was making: People don't want uncertainty and risk when it comes to their home.

Hence the possibility of a small gain by holding the endowment will not be enough to balance the risk of falling short.They will prefer to obtain certainty.And if it can be shown that there is a potential gain by cashing in, then the way forward will be very clear.

The fact is that no endowments nowadays do what they originally said on the tin, ie pay off the mortgage and provide a substantial tax free cash surplus. Advisors shouldn't be surprised if people decide they are now no longer required on voyage.

dunstonh

This is one of the points I was making: People don't want uncertainty and risk when it comes to their home.

Really? Why are so many people getting into extreme debt with buy to let mortgages? Why do so many people change from endowments to ISAs?

I think the risk bit is more of an excuse by some to try and get redress.

JoeK_3

EdInvestor wrote: »

This is one of the points I was making: People don't want uncertainty and risk when it comes to their home.

Hence the possibility of a small gain by holding the endowment will not be enough to balance the risk of falling short.They will prefer to obtain certainty.And if it can be shown that there is a potential gain by cashing in, then the way forward will be very clear.

The fact is that no endowments nowadays do what they originally said on the tin, ie pay off the mortgage and provide a substantial tax free cash surplus. Advisors shouldn't be surprised if people decide they are now no longer required on voyage.

I have not seen one simple comparison on this site that shows the advantages of surrendering an endowment, as apposed to continuing with it.

Such a comparisons would have to include the following:

1) Paying the surrender value off the mortgage loan amount.

2) Over paying the previous endowment monthly premium into the mortgage.

3) Comparing the cost of the replacement loss of life/critical
illness insurance.

4) Projected endowment returns based on investment mix both now and in the future.

5) Projected mortgage interest rate for the remaining mortgage term.

Or continuing with the endowment

When people on here can demonstrate that the comparison has been completed and a surrender is advantageous in monetary terms, I will support it 100%.

JoeK

dunstonh

I posted in the pension section on a running thread that I dont understand how Ed can assume people dont want risk on houses yet she actively encourages everyone in the pension section to do income drawdown. A high risk transaction which if investments do well, can see you get more but if investments do bad, see you lose money. Sound familiar?

Ed, you didnt answer the question when I posted it in the pensions section so I will ask it here as well. How is it that you think that people are not willing to take the risk to borrow and invest but when it comes to retirement they should be investing, what may be their only source of income in retirement, in a risky retirement plan?

Why is it that you think a 20 year old wont want investment risk on their mortgage but you think that a 70 year old should be risking their retirement in what is basically the same thing?

Crazy_Saver

JoeK wrote: »

I have not seen one simple comparison on this site that shows the advantages of surrendering an endowment, as apposed to continuing with it.

Such a comparisons would have to include the following:

1) Paying the surrender value off the mortgage loan amount.

2) Over paying the previous endowment monthly premium into the mortgage.

3) Comparing the cost of the replacement loss of life/critical
illness insurance.

4) Projected endowment returns based on investment mix both now and in the future.

5) Projected mortgage interest rate for the remaining mortgage term.

Or continuing with the endowment

When people on here can demonstrate that the comparison has been completed and a surrender is advantageous in monetary terms, I will support it 100%.

JoeK

Hi Joek.

I think my endowment is probably one of the exceptions to the rule. No one so far has recommended keeping it.

Eagle Star - now Zurich
With profits
Target £60k
premium £71.20pcm
Sum assured £16,200
Bonuses £5,249.97
Bonus this year £53.00
Matures Sept 2016

Surrender value £15,173

projection @3% £26,500 @5% £31,100 (they only give 2 rates now)


My Endowment is split -

71% Fixed interest
21% UK Equities
4% Properties
4% Cash

I have spoken to Zurich and the telephonist said that as most of my money is in fixed interest, it means it's regarded as "safe" and would therefore have a return of 3.75%. At least she was honest and agreed with me that the future doesn't look good for my endowment return




Replacement life cover is £12.


Have put the policy up for sale 3 times. No offers except Surrenda link who are offering £400 more than surrender value.

Have decided to accept the offer and use it to pay of some of loan, also overpaying endowment premium every month and going full repayment route.


Having said all this, we originally had a policy with Reliance Mutual which an advisor advised us to surrender(I know it's a case of churning but I won't bore everyone with that side of things). From what I can make of things, their policies are doing very well and as you and many others quite rightly say, "had we kept that policy and we were facing a decent surplus, would we be claiming a mis-sale?".

Of course we wouldn't. Although I doubt that we would have realised that we had ever even taken a risk with the repayment of our mortgage. I, like many other people was guilty of being very naive and probably still would be if endowments hadn't suffered the way they have.

I wonder how many people who are showing a surplus, are still claiming mis-selling due to the fact that they were not made aware that they were risking their home? Now there's a can of worms waiting to be opened;)

dunstonh

wonder how many people who are showing a surplus, are still claiming mis-selling due to the fact that they were not made aware that they were risking their home? Now there's a can of worms waiting to be opened

Quite a lot. It is increasingly common for no redress to be payable or the redress amount to be less than the surrender penalty.

It is another fault of the redress system that someone a few years ago could have got a lot of redress but still find their endowment pays a surplus.