Prudential Endowment

thebullsback

Called the Pru. yesterday for an update on my £28.80p per Month 25 year Home Purchase (Ex Scottish Amicable) endowment which matures next year.
£13580 as of yesterday.
Absolutely shocking.If I write and ask for my charges back due to performance do you think I stand a chance?

dunstonh

If I write and ask for my charges back due to performance do you think I stand a chance?

None whatsoever. Pru are not responsible for general performance. Scot Am WP plans are not that bad. Not as good as Pru original plans but not bad.

Did the value include any final bonus accrued to date? The pru system tends to show that separately to the value and not inclusive.

thebullsback

I asked if the figure included "Any final Bonus" and was told yes.
Might still write when I get my pittance next year even if its just to vent my frustration.

FormulaDriven

Can't be exact with your figures, but if you've paid 24 years of premiums and that's the current surrender value, then that looks to be between 3% to 4% return on your premiums. As investment returns are taxed on endowments (20% off) and there would have been charges, the underlying assets could have earned 5% or more.


Disappointing, but I wouldn't call that shocking given that you've presumably been invested in risky assets through three crashes / recessions, and had life cover as part of the contract.

dunstonh

I have to agree. The return does not seem unreasonable for a surrender value. it is a cautious fund. it was never going to set the world on fire and it invested through two major declines of a level that are normally only once in a generation. Not twice in 10 years.

thebullsback

I remember the "Sales guy" saying to me when I asked him ...Whats an Endowment ?? and he said it is cheaper than a repayment mortgage and at the end there will be enough in the pot to pay off the mortgage and money left for holidays or car or home improvements.
OK I got compensated around £600 in the late 90s due to miss selling and I moved home and have just kept the Endowment on as a savings pot BUT I still think its a Shocking return bearing in mind there are supposed to be Top Notch Fund Managers looking after this and other pots.

thebullsback

PS its not a Surrender value I asked how my Fund was doing.

FormulaDriven

Yes, if you asked how your fund is doing, I would take that to mean what is my policy worth at the moment and they would illustrate that with the surrender value.


Even top notch fund managers who have an investment mandate to invest in a range of assets including equities (typical for a with profits fund) are going to struggle if the stockmarket is crashing. They might be able to add a percentage point to the market average here and there (although I think that's sometimes doubtful), but they don't work miracles.

thebullsback

OK maybe I'm been to harsh.

dunstonh

Whats an Endowment ?? and he said it is cheaper than a repayment mortgage and at the end there will be enough in the pot to pay off the mortgage and money left for holidays or car or home improvements.

Yes, they were cheaper than repayment mortgages and that was often the reason people did them. And upto the very late 90s, no endowment had ever failed to hit target. I remember the maturities in the 90s paying out 2 or 3 times more than their target. When something has never failed or suffered an issue and is cheaper than an alternative, then complacency can set in and the risk becomes less apparent.

BUT I still think its a Shocking return bearing in mind there are supposed to be Top Notch Fund Managers looking after this and other pots.

Pru have a very good track record to be fair and do a good job. it is cautious fund and delivers returns in line with a cautious risk profile.

The period you invested as not a good one. Normally, you see relatively frequent stockmarket corrections and periodic crashes and rarely see a major decline. You more or less had the perfect storm for providing lower returns.

Your period saw virtually no corrections or crashes in the first decade. That was really bad news as the corrections and crashes in the first half are where a lot of the gains are made. Then along came the dot.com crash followed by a series of events that saw a 43% stockmarket drop. A level only seen once in a generation. Your money paid to that date lost a lot of money and still, as of today, would not have returned most of its capital value. Although there would have been distributions.

That was not the big problem though as you still have nearly 15 years of paying in and could take advantage of that drop with the regular payments.

However, the regulator forced insurers to focus on their liabilities as a priority and not the returns. This meant most WP funds moved to a more cautious spread and this happened after the crash. Plus, just as things were improving and getting on track again, along came the credit crunch and global recession. Another 43% loss period. That is unprecedented. Despite all that, you have still managed to obtain a return higher than a bank or building society account.

If you are investing in the stockmarket and the it goes down 43% then you are going to suffer a 43% loss with a variance either side of that depending on how you invest. You are not going to avoid those losses no matter how good you are. you may get -40% or you may get -46%. But you are going to suffer regardless. Your fund is multi-asset and invested in a spread of assets. So, you are not going to get the big losses when they occur (closer to 20-25% for the credit crunch). You are also not going to get the high returns during the good years.

you are getting what you expect a fund of that asset mix and guarantee level to provide you. Your expectations are not in sync with the investment risk you are taking and you appear oblivious to the events of the credit crunch, in particular as well as other historic events (reading back on that sentence sounds harsh but I don't mean it that way. I am just trying to point out that you don't appear to be factoring in the seriousness of the global recession and the impact it had).

FormulaDriven

No problem.


I work in life insurance, so I'm being a bit defensive. I know that the industry has done plenty of things that aren't that great with charges, advice etc, but I suppose I get a weary of the knee-jerk view that it's all a rip-off. We generally work within the constraints of regulation and the economic environment to provide the customer with what they are expecting. (In fact, the regulatory environment these days is a lot tighter to ensure we don't stray...)