endowment value changes

Tamgb

endowment due to mature shortly & regular letters have shown estimated value we can expect to receive - can this be reduced significantly by the endowment provider at the last minute, with no warning? (so much so that if value now seeing is correct - policy wouldn't even cover the monies put in)

amnblog

Depends on the provider and the type of endowment policy.
Why don’t you phone the Provider up and ask them. They may have some suggestions on what you can do to meet your needs.

Old_Lifer

You need to tell us  about the type of endowment you have before anyone here  can give you a proper reply.

An endowment can be:

Conventional 'with-profits' which has annual bonuses added

Unitised  'with-profits' which has bonus units added

Unit-linked  which is linked to an investment fund.

Take a look at you latest annual statement.  It should mention bonuses or bonus units or units.

At the end of the day an estimate is only an estimate and a reduction at this time of year  may occur on a with-profits  policy where a reduction in terminal bonus rates at the year end is applied to policies in the coming year.

Tamgb

sorry - 1st time on this type of forum - the policy is a mortgage endowment policy unitised with-profits fund.

SonOf

Values go up and down on a daily basis.  A unitised with profits plan will be a guaranteed minimum maturity value but the final bonus on the plan that has accrued to date could be removed

Old_Lifer

Under certain investment market conditions, a Life Office may decide to exercise a Market Value Adjustment and reduce the value of a policy for those leaving early. This is done to ensure that those leaving early do not get more than their 'fair share' of the investment pot.  However,  the MVA is not applied on death or maturity.

Since you have a with-profits policy which is about  to mature, the reduction indicated  is most likely due to lower rates of terminal bonus being introduced at the year end.  The terminal bonus is not guaranteed and can be altered up or down at any time but most Life Offices alter terminal bonus rates at the year end  and the new rates  can be in force for many months  and sometimes for the whole of the coming year.

It is also possible  that  the terminal bonus has not been included  in your latest  'estimate'  and    not  jncluding  the terminal bonus  in the figure,  may explain why there has been a  significant drop.

May I suggest that you contact the Life Office and ask the reason for the reduction in the estimated value.

Tamgb

I will contact the provider on Monday - the online account of the provider is still telling me a value closer to the expected maturity value - so hopefully it is simply an omission on their part for the figure they have included in the paperwork sent out

SonOf

Tamgb said:

I will contact the provider on Monday - the online account of the provider is still telling me a value closer to the expected maturity value - so hopefully it is simply an omission on their part for the figure they have included in the paperwork sent out

Projections can be unreliable.   A lot of bad decisions have been made over the last 20 years from people acting on projections without understanding the limitations.  For example some projections will:
1 - Project from the surrender value rather than the current position.
2 - Project from the unit price but not include any final bonus accrued to date
3 - Project using low growth rates before charges (nearly all do this) and if they include a deduction for inflation it can actually create a negative projection.     You also see this on pensions nowadays too.
4 - If there is an MEP (mortgage endowment promise - mainly ex Pearl, Standard Life and Aviva) then these are not normally including in the projection.

If you look at your unit value and add on the final bonus accrued to date, that is your current position.