High Risk of Shortfall - sell or hold?

Hi,

I’m looking for some advice on an endowment which I hold.

I have 7 years left on the policy, which is a with-profits sub-fund.
I pay in £70.24 every month and it was originally taken out to pay off around £42,000 of a mortgage.

The current surrender value is approx £24k and the fund value is approx £14,600 (final bonus being the difference).

If we assume the low rate projection, the endowment will have a shortfall of £13k, when it matures (current low rate projection is approx £28k).

This was a Friends Provident endowment, which has since been sold on to Aviva.

I contacted Aviva to ask about the Moetgage Endowment Promise, having read about it on the forums here, but they didn’t know what it was, so they’re going to forward my enquiry to another team, who will update me.

I’ve been receiving varying predictions of shortfalls since only a 3 or 4 years after I took out the policy, but just never did anything about it.

The related mortgage was long since paid off.

Questions:

Should I persevere with this or sell up now?

If I sell, is there any way I can get more than from Aviva?

Is it likely that I could get any compensation or have I missed the boat?

Thanks in advance for your advice!

Replies

  • ThrugelmirThrugelmir Forumite
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    If you've yet to pay £70 * 12 months * 7 years = £5,880

    Forecast value vs current surrender value suggests your money may be better utilised elsewhere, i.e. pension.
  • alexeixalexeix Forumite
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    That’s what I’ve been thinking.

    In terms of compensation, is that still an option?
    I have no idea if I would be eligible, but given that I started receiving shortfall letters within a few years of taking out the policy, it would seem that I may have been mis-sold the policy.
  • dunstonhdunstonh Forumite
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    In terms of compensation, is that still an option?

    Around 3/4 of all endowments sold are now timebarred from complaint. You have 3 years from being reasonably aware of an issue to raise a complaint. That is typically 3 years from the mid rate projection showing a shortfall. Not all companies applied the timebar. Although Friends Provident were one of the first to do so.

    The uphold rate on endowments that are not timebarred and looked at by the FOS is just 14% currently.
    I have no idea if I would be eligible, but given that I started receiving shortfall letters within a few years of taking out the policy, it would seem that I may have been mis-sold the policy.

    not at all. Projection rates on statements are synthetic and not necessarily real world. Life and pension projections have been pretty heavily understating the likely to returns for a few years now.

    If your endowment was set up on day one to hit target at say 6% target growth rate but the synthetic projections sent each year showed the mid rate at 4% then it would instantly be in shortfall according to the projections.

    If the target growth rate was unreasonable at the start, you may have a case but seeing as FP timebarred theirs in the early 2000s, you have possibly missed out on that. And even if it was not timebarred, most complaints fail. Bottom line, its possible but odds are very much against you.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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