Standard Life MEP

glottalstop

The Standard Life Homeplan with profits endowment into which I have paid £39,000 over the last 21 years is due to mature next month. The payout is going to be around £48,000 versus a target £60,000.

No surprises, the red alert has been flashing for years, but this was not a low-cost plan and the outcome is pretty pathetic. I know this is an industry wide problem but I would still like someone or something to blame - for sure I will not be re-investing with Standard Life.

So what about the Mortgage Endowment Promise?

Since Standard Life demutualised in 2006 it has said every year that I may be entitled to an MEP payment of £644-967. Thanks for not very much. Why does this have to be such a mystery?

Does anyone know what I can expect?

amnblog

glottalstop wrote: »

I would still like someone or something to blame?

Blame low interest rates. Endowments were widely used in markets where rates into double figures were common and equity returns higher.

An endowment priced to hit target with today's low interests would not be palatable.

I suspect the interest you have paid over the 21 years on your mortgage is well below that expected at outset.

Swings and roundabouts.

warwicktiger

"but this was not a low-cost plan "

Very true, it was a "Minimum cost Plan", cheaper than a low cost plan with lower anticipated returns

dunstonh

but this was not a low-cost plan

It must be to have a shortfall. Full cost endowments cannot have a shortfall. Only low cost ones can.

but I would still like someone or something to blame

The economy moving from high inflation, frequent boom/bust to low inflation with longer period of growth and credit crunch.

If we had maintained higher mortgage interest rates and gone through more frequent boom/busts then this would not have happened. However, had that economy continued, you would have been worse off. You have to look at the whole picture and not the endowment in isolation.

So what about the Mortgage Endowment Promise?

What about it? You will get it on maturity

Why does this have to be such a mystery?

Why do you think it is is a mystery? The few standard life endowments I have on my books show the potential MEP value on each summary statement issued to us. Standard Life can tell you upon request what the potential range of it is as well.

glottalstop

This wasn't a designated low-cost policy (£154.16 pcm over 21 years to return £60,000). I cashed one which was low-cost (£58.12 pcm over 25 years to return £47,000) in 2008 and used the proceeds to repay some capital. The fund shrank that year while the mortgage rate was still 6.5%. The recent spell of low mortgage rates is no comfort, the mortgage rate over the term has been significantly higher than the endowment return achieved by Standard Life.

The Homeplan outcome is poor but I'm guessing from your lack of sympathy that a combination of historic over-generosity to policyholders in the golden years of endowments (I can remember my father crowing that his policy yielded three times its target), demutualisation handouts, high charges and poor performance mean I am in the same boat as many others. Standard Life may not be the worst but they don't seem too bothered about how far short they have fallen on their promise as it was sold to me - "the return is not guaranteed but no policy has failed to meet its target".

This close to maturity saying an MEP of £644-967 may be payable is broad, so my question was does anyone have recent of experience of what actually gets paid out? Or how I can work out what is due?

dunstonh

hey don't seem too bothered about how far short they have fallen on their promise as it was sold to me

No such promise was made.

the return is not guaranteed but no policy has failed to meet its target

Which was correct at the time. The series of events that failed the endowment have made you better off elsewhere.

so my question was does anyone have recent of experience of what actually gets paid out?

yes

Or how I can work out what is due?

£644-£967 from what you say.

crazyhugh

I believe SL are currently providing MEP payments of about 68% of the original shortfall figure from 2005

crazyhugh

The figures quoted are for 40% and 60% repectively of the shortfall amount in 2005.
Currently SL are providing 68% as a MEP payment, so the figure received should be a bit higher

blibster

So, if MEP is currently 68% does that mean the OP is going to get £967 *(.68/.6) = £1096? Is that how it works?
It seems to be wrong as that amount is outside the range specified by SL