Endowments - how do we know if it is on target or not?

Mslouise

We have 11 years left to run on our endowments (yes, we were taken in by financial advisers in 1999 and secured our first mortgage with endowment policies).

To date all the letters have been green but how much faith should I have in these letters and is there any alternative way of calculating if our policies are currently on track to pay out what we need them to?

We are trying to decide whether it is better to sell them and use them to pay off the capital on our house (currently our mortgage is part interest only/part repayment) or keep going with them.

Many thanks

TrickyDicky101

What's your outstanding mortgage amount, monthly premium you pay into your endowment, the interest rate on your mortgage, and current endowment valuation, and exact time remaining on mortgage and endowment (if different)?

With that you could apply a return to your endowment/monthly prems and compare vs cost of a repayment. This would not include the life cover benefit so you would need to factor this in.

Dick_here

If you get a 'red letter' then it isn't on track. Would you believe that ?

Mslouise

We have £70,000 of our mortgage on interest only and pay 2x£85 per month with 10 years, 11 months to run. I was quoted £15,000 for each endowment a few weeks ago ie £30,000 in total).

We currently also owe £84,000 in repayment with 16 years 10 months still to run and are paying 4.79% (we are stuck on SVR as the endowments mean we have a low loan to value rate).

Mslouise

!!!!!!_here wrote: »

If you get a 'red letter' then it isn't on track. Would you believe that ?

Yes, I would - so are the green letters trust worthy then? I thought I read somewhere a while back that they meant very little. Am happy enough if it means they are on track at the minute and understand that you can't predict the future.

McKneff

Trust the green letters till you get a red one.


No one wants to buy these sort of policies these days.


You could change to a repayment mortgage and either leave the policies running and have a nice little windfall when they mature or cash them in with the company, which probably wont be a lot.

magpiecottage

If you think you were missold the endowment you can complain to whoever sold it to you. If it is upheld, you will be offered an amount that is enough, when added to the current surrender value, to reduce your mortgage to where it would now be if you had taken out a repayment mortgage at outset.

On the other hand, if the letters are still green it may be that you are actually better off. If so, you will not get any redress at all.

McKneff

I thought these 'maybe mis sold' endowment claims were time barred now, am I wrong

dunstonh

To date all the letters have been green but how much faith should I have in these letters and is there any alternative way of calculating if our policies are currently on track to pay out what we need them to?

For the last 5-6 years, the example projection rates for mid and lower have actually been lower than the actual medium term returns (including credit crunch period) with most providers. So, they are probably realistic assumptions. Although nothing is ever guaranteed.

A 1999 policy could actually end up being very good. The last decade with its volatility really suited an endowment policy in its infancy. It would just a nightmare for those near the end of their term which had a stunning growth period at that the start and a really poor period at the end.

yes, we were taken in by financial advisers in 1999 and secured our first mortgage with endowment policies

Your endowment is green even on todays lower growth rates. Disclosure requirements in 99 were far higher than earlier years. So, why do you think you were taken in?

I thought these 'maybe mis sold' endowment claims were time barred now, am I wrong

A green one cannot be timebarred using the usual method. An endowment projection for mid rate has to drop into shortfall and a "high risk of a shortfall" warning given out (Also known as red warning). A complaint about an endowment in "green" would be largely pointless as even if your complaint succeeded, the fact it is on or above target would result in no money.

There was at least one provider some years ago that stopped amber warnings and only used green/red to allow it to activate the time bar clock on more of its policies than it could if used red/amber/green. Some others have also used lower growth rates in their projections which can artificially create a red warning and start the clock. So, there has been some manipulation of the system but only in ways that would likely understate the likely outcome rather than overstate it. Being prepared for a worse outcome but delivering better is fine. It was the other way around that got endowments in to trouble in the first place.

opinions4u

Green means good. Amber means iffy. Red means bad.

It's possible to change from green to red. It's possible to remain green to maturity.

You have all the information that you're going to get. It's green. It's on target. I'm jealous.

dunstonh

opinions4u wrote: »

Green means good. Amber means iffy. Red means bad.

It's possible to change from green to red. It's possible to remain green to maturity.

You have all the information that you're going to get. It's green. It's on target. I'm jealous.

It is also possible to be red the whole term and still hit target and provide a surplus.

e.g. an endowment policy with a 6% target growth rate to hit target that achieves 7% p.a. but has a projection rate of 4% on the statements would see red warnings for most of its life.