Standard Life,loanback,projections - DFW

EdInvestor

Oh, and about the alleged mortgage promise...

http://www.fairinvestment.co.uk/insurance-news-Standard-Life-ends-endowment-mortgage-pledge-3565036.html

Spirit_2

I read the Telegraph Article which was pretty gloomy (May 2007) which told me that a policy maturing in 2006 paid out 41806, and that a similar one in 2007 would be 38338 - a 3468 reduction. Thanks to the responses on here I think I now understand why - a good year in the eighties drops off and a poorer year comes within the 25 year time frame. Any additional insights would help.

dunstonh

EdInvestor wrote: »

Oh, and about the alleged mortgage promise...

http://www.fairinvestment.co.uk/insurance-news-Standard-Life-ends-endowment-mortgage-pledge-3565036.html

The promise still exists. It just was watered down and reduced. It is still worth around £3-£5k on the average policy. You can phone up standard life and ask them what your mortgage promise value maximum is.

Thankyou for taking the trouble to explain this. Can you direct me to a recent illustration of how recent maturity values have been greater than expectations? I am just off to read the Telegraph article referred to; but it would be good to see how SL has recently worked for others.

I cannot. There was an example posted online with a pdf showing one but the link is dead now.

It is a known issue in financial services. Its a case of analysing the data and knowing what to look for. The projections issued dont include final bonus and dont include promise value. In the past, the lower projection on some of the older endowments was less than the guaranteed minimum maturity which isnt possible.

I did get a maturity notice a few weeks back which was showed the current estimated maturity. It showed the current annual bonus and guaranteed sum assured plus a few pounds extra. It did not include the £6k worth of terminal bonus that was currently sitting on the plan.

xtratime

How does todays announcement impact this decision?

http://uk.standardlife.com/content/pdf/slac/31072007_wpbannounce.pdf?show=true

EdInvestor

xtratime wrote: »

How does todays announcement impact this decision?

http://uk.standardlife.com/content/pdf/slac/31072007_wpbannounce.pdf?show=true

Still going down, though the rate of reduction has been at least temporarily slowed, partly because of the one- off enhancement from the inherited estate.

I read the Telegraph Article which was pretty gloomy (May 2007) which told me that a policy maturing in 2006 paid out 41806, and that a similar one in 2007 would be 38338 - a 3468 reduction.

The current maurity value of this policy would be 38,084.

There has been a mild improvement in the investment mix, with more money now in equities, which should also help in reducing the ongoing decline.

dunstonh

Still going down, though the rate of reduction has been at least temporarily slowed, partly because of the one- off enhancement from the inherited estate.

What do you mean it is still going down? The standard life interim announcement says: Year on year increases in payout values across all types of policy

It is not going down. It is going up. You continue to work by that stupid 25 year table that shows year 25 drop off and year 1 get added. Cumulative average performance is no indication of current or future potential. It tells you what you would have got in that particular 25 year period. It doesnt tell you what you are getting now or what you are getting in future.

Using your way of doing it, you will be recommending people keep the endowments in around 10 years time as the good years at this end replace the poor years at the other end. That could be in a totally different cycle where bonus rates are on the decline again and I will be saying its time to get out and you will be saying that the 25 year table shows things improving.

The current maurity value of this policy would be 38,084.

What about the mortgage promise value to be added on top? Probably another £3k-£4k on that value.

Ricardoro

The debate between Dunstonh and Edinvestor has been very enlightening, if heated!

I have just phoned SLife and been told that I have no Mortgage Promise because there was no deficit in 2000 when the promise was made (???); I sure as heck have a deficit now!

Also, a question for Dunston... having taken your well made points about series of growth figures over time, would you nevertheless agree with Ed's assertion that:
...
"This can lead to the unfortunate situation where you pay in 18 months premiums only to discover that at the end you get the same back as the surrender value 18 months earlier."

or in other words does a Surrender Value give me now the opportunity to benefit from early years high returns that I may lose if I allow the policy to run for the rest of its 4 years to term.

dunstonh

"This can lead to the unfortunate situation where you pay in 18 months premiums only to discover that at the end you get the same back as the surrender value 18 months earlier."

or in other words does a Surrender Value give me now the opportunity to benefit from early years high returns that I may lose if I allow the policy to run for the rest of its 4 years to term.

That scenario is possible. However, you have to weigh up the cost of surrender.

Look at your current position of guaranteed sum assured, annual bonuses and current final bonus and compare that to the surrender value. The difference is the cost of surrender. If that cost is too high, then its worth staying put.

Ricardoro

dunstonh wrote: »

That scenario is possible. However, you have to weigh up the cost of surrender.

Look at your current position of guaranteed sum assured, annual bonuses and current final bonus and compare that to the surrender value. The difference is the cost of surrender. If that cost is too high, then its worth staying put.

dunstonh

Sorry if I'm a bit slow here, but does this imply that the current final bonus is a guaranteed minimum in four years time; I thought that it only stood for now and that at full term I might receive any figure between zero final bonus and something larger, all depending on investment success at that time.

MarkyMarkD

Dunston

Whilst I agree with you in agreeing with the first paragraph of Ricardoro's post, I'm sure you didn't mean to agree with the second paragraph.

Taking a surrender value doesn't mean you get the benefit of earlier, better returning, years which then drop off as Ricardoro suggests. EARLIER YEARS NEVER DROP OFF AN INDIVIDUAL POLICY! They only drop off if you use the incorrect comparison of rolling 25 year periods, as EdInvestor insists on doing.

But it might protect you from a fall in terminal bonuses caused by (say) a big crash in SL's investment values.