Endowment - poor performance

GingerBob_3

I have an endowment policy maturing next month. It's run for 25 years, costing £50 pm and is paying out about £23.5k. I rate that as exceptionally poor performance - I've complained, for all the good that will do.

Ball park - what would you expect £50 pm to achieve over 25 years (stock market investment, mainly)? Thanks.

TrickyDicky101

So you've paid in £600 per year from the star (£15k in total) and getting back £23.5k? That doesn't sound like poor performance to me - what makes you think it is poor performance?

GingerBob_3

TrickyDicky101 wrote: »

So you've paid in £600 per year from the star (£15k in total) and getting back £23.5k? That doesn't sound like poor performance to me - what makes you think it is poor performance?

Over the 25 year period it's accumulated at a rate of about 3.6%. I think for a mainly stock market investment that's pretty poor.

It was sold to me with an estimate of paying out about £40k. Of course investments can go down as well as up etc. etc. but for me the clincher is another comparable policy I have, which will mature in 2 years. It is performing much better. Maybe the fund managers of the "underperforming" policy are not up to the job?

dunstonh

I've complained, for all the good that will do.

The FCA dont require companies to answer performance related complaints.

Over the 25 year period it's accumulated at a rate of about 3.6%. I think for a mainly stock market investment that's pretty poor.

A 25 year period that has seen two major declines of a level that only typically occur once in a generation. A maturity date that sees the UK market at a level it was 15 years ago. It seems about right, if its a low/medium fund to be honest when you factor in the charges for the era and cost of life cover. You dont actually mention the fund though so we can only guess at the moment.

It was sold to me with an estimate of paying out about £40k.

in 1989, maturities were paying around double the target figure, if not more.

Maybe the fund managers of the "underperforming" policy are not up to the job?

Maybe they are, maybe they are not but the biggest issue is timing. 1989 through to early 2000s so very little volatility. So, you dont get much benefit of pound cost averaging in the first half of the policy. The second half saw extreme volatility and markets similar to the start of the second half.

GingerBob_3

The provider is Aviva. They invited me to complain when I whinged at the operative on the phone about the poor performance. As I said, the thing for me is the comparable policy, 22 years, £60 pm, running over basically the same period, and which is on track for well over £30k (about 6% return).

want_to_save

You should be aware that there have been letters sent to all owners of endowments telling them how much a short fall there would be if any. You were given a right to reply. It is no secret that there was a huge misselling of endowment policies in the 80s and 90s so why would it be a LBM that this plan has 'underperformed'.

to be honest it was unliekly to provide youwith the '40k' you were promised. that is just a projection its not a promise of any kind. at least you will get back more than you put in!.

GingerBob_3

want_to_save wrote: »

You should be aware that there have been letters sent to all owners of endowments telling them how much a short fall there would be if any!

I know, I got them.

want_to_save wrote: »

You were given a right to reply.

I did.

want_to_save wrote: »

It is no secret that there was a huge misselling of endowment policies in the 80s and 90s so why would it be a LBM that this plan has 'underperformed'.

It was adjudged mine was not mis-sold (and what's LBM)?

want_to_save wrote: »

to be honest it was unliekly to provide youwith the '40k' you were promised. that is just a projection its not a promise of any kind. at least you will get back more than you put in!.

I used the word 'estimate', not 'promise' and I believe in 1989 is was probably a reasonable estimate.

As said, my gripe is the performance when compared to another similar policy form a different provider.

want_to_save

LBM is Light bulb moment

and as you say its only an estimate. You cannot guarantee what you will get at the end of the 25yr term.

When i took my mortgage out in 1999 i did this on interest only and had an endowment along side. all it took was 1 annual statement from the mortgage lenders to switch to repayment and then after 6 years of paying into an endowment that was underperfoming i cashed in and used the monies to buy a boiler.

Thrugelmir

GingerBob wrote: »

Over the 25 year period it's accumulated at a rate of about 3.6%. I think for a mainly stock market investment that's pretty poor.

You've also had the benefit of life cover in that time.

GingerBob_3

want_to_save wrote: »

LBM is Light bulb moment

and as you say its only an estimate. You cannot guarantee what you will get at the end of the 25yr term.

When i took my mortgage out in 1999 i did this on interest only and had an endowment along side. all it took was 1 annual statement from the mortgage lenders to switch to repayment and then after 6 years of paying into an endowment that was underperfoming i cashed in and used the monies to buy a boiler.

Yes, I did a similar thing on another of my policies. The repayment conversion is now almost paid off and I had £6k in my back pocket at the time. That one worked out well.

GingerBob_3

Thrugelmir wrote: »

You've also had the benefit of life cover in that time.

Good point, but I think it is still underperforming. Actually, what's really annoying about this one is that in the last 12 months its value has increased only by just over £1500, when stock markets have gone up considerably.