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Matured Endowment policy

Hi.
I had an endowment policy from June 1995 to June2020 for £60k. This has now matured and they want to give me lump sum of £40.2k. Includes bonus. I was told I will have surplus. I have already paid off the mortgage but was hoping for better lump sum. Is there a method I can argue my case to obtain more or should I settle with what’s been given to me?

Please advise and your help will be much appreciated.
Thank you.
Tom

Comments

  • cattie
    cattie Posts: 8,841 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Very few people have received the sum they had expected when their policy matured for a good few years now. Policy holders were warned to ensure they had taken other steps to ensure there would be enough money to clear the mortgage the policy was taken out for in light of shortfalls due to stock market conditions etc.

    You're lucky you've already cleared your mortgage & I think you'll find you just have to accept the sum offered on maturity.
    The bigger the bargain, the better I feel.

    I should mention that there's only one of me, don't confuse me with others of the same name.
  • Albermarle
    Albermarle Posts: 25,884 Forumite
    10,000 Posts Sixth Anniversary Name Dropper
    As above , endowment based mortgages generally did not work out as planned . Many people have been left with a big shortfall and still some of the mortgage to be paid off.
    Although repayment mortgages were unfashionable 30 years ago, it would have been better to have one in most cases.
  • dunroving
    dunroving Posts: 1,881 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    For comparison, both endowments I took out in the late 1980s paid out less then projected. One paid out 87% of the projected amount and the other paid out 76% of the projected amount. If your numbers are correct, it looks like yours will pay out about 67% of the projected amount.

    However, when I did the maths, mine returned an average of 5% p.a., so I was not too bothered. 
    (Nearly) dunroving
  • daveyjp
    daveyjp Posts: 13,140 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    My endowment matured about 5 years ago.  Starting at least 10 years before it matured I was sent a warning letter every year advising me of a potential shortfall and giving information on how I could claim compensation.

    There was a deadline for claims, but IIRC this expired a long time ago.

    Did you receive any such warnings?  It may be worth checking with your provider.


  • dunstonh
    dunstonh Posts: 118,545 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Is there a method I can argue my case to obtain more or should I settle with what’s been given to me?

    Values are available on a daily basis and you get the value at maturity of what it should be on that day.  It is not a case of haggling.

    Although repayment mortgages were unfashionable 30 years ago, it would have been better to have one in most cases.

    Not necessarily.  Of course things like this are never as straightforward and simple but one of the most common reasons for doing endowments back then was that they were cheaper than repayment mortgages.   Saving £20-£30pm in late 80s was a lot of money.   And probably worth more to the person than a shortfall at the end.  If you assume 25 years of £25pm saving that is £7500 less paid.  So, a small shortfall could still see people better off.

    The problem with endowments is that they could be set up with target growth rates from really low figures like 3-4% p.a. or as high as 13-15% p.a.  We have someone on our books with a 4.4% target and is in surplus and maturing shortly   

    In this case, a £20k surplus is very large and suggests a very high target growth rate was used.   

    Complaints about endowment sales started just after 2000 when they went into shortfall territory for the first time in their existence.   Timebar rules were set to allow the 3 & 6 year timebar rule to be applied to the statements as long as the mid rate projection showed a shortfall.    By around 2007, around three quarters of endowments were timebarred from complaint.

    However, when I did the maths, mine returned an average of 5% p.a., so I was not too bothered. 

    That's the thing. It isn't the rate of return that is the issue.  If yours had been set up with a 4.4% target growth rate, you would have had surplus.  It didnt and was set up with a growth rate in excess of 5%.  Hence the shortfall.


    The endowment issue is a good example of not letting complacency set in.  Just because something has never failed does not mean it wont fail in the future.   

    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.
  • Old_Lifer
    Old_Lifer Posts: 780 Forumite
    500 Posts Second Anniversary
    A traditional endowment mortgage would  be guaranteed to repay the original  mortgage provided all premiums were paid until maturity,  since the endowment sum assured was the same as the mortgage amount.   These mortgages were expensive but were very tax efficient
    .
    However, very few people would have had a traditional  (full endowment) mortgage.     Most would have had a low-cost endowment mortgage ( a budget version of an endowment mortgage)  since these were mass-marketed  and in terms of cost compared well to a repayment mortgage.    Typically,  with a 25 year mortgage, the endowment would have been around 40-45 percent of the mortgage amount, the hope being that  with the addition of bonuses the mortgage would be repaid at the end of the mortgage term with  an amount left over   and   this was indeed what usually happened,   until  in the early  1990's cuts in bonus rates year after year led to increasing expectations of shortfalls.

    At maturity, the policy is worth whatever it is worth.   It is not a matter for negotiation.
  • Socajam
    Socajam Posts: 1,238 Forumite
    1,000 Posts Second Anniversary Name Dropper
    My endowment mortgage paid out just over 47k instead of the 60k to repay the mortgage - I took out my mortgage in 1989 when interest rate was 15%.
    As someone stated, letters were sent annually, informing me that there would likely be a shortfall to the mortgage and I should make provisions for this.
    Ten years before the mortgage was due to end I switched to repayment and continued paying the endowment.
    I fail to see how mortgage holders think that companies are at fault when endowment holders were given written warnings annually to make plans for any underpayment.
  • dunstonh
    dunstonh Posts: 118,545 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    I fail to see how mortgage holders think that companies are at fault when endowment holders were given written warnings annually to make plans for any underpayment.

    One of the biggest failings of the endowment issue is that as inflation reduced and net returns fell and interest rates fell, people should have been told more forcefully that they should convert part of their mortgage to repayment basis to reflect the change in the economy.   Households were hundreds of pounds a month better off and could have easily put aside some of that to make up the difference.   Sensible people did but as usual, too many bury their heads in the sand or totally ignore the letters.

    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.
  • Socajam
    Socajam Posts: 1,238 Forumite
    1,000 Posts Second Anniversary Name Dropper
    dunstonh said:
    I fail to see how mortgage holders think that companies are at fault when endowment holders were given written warnings annually to make plans for any underpayment.

    One of the biggest failings of the endowment issue is that as inflation reduced and net returns fell and interest rates fell, people should have been told more forcefully that they should convert part of their mortgage to repayment basis to reflect the change in the economy.   Households were hundreds of pounds a month better off and could have easily put aside some of that to make up the difference.   Sensible people did but as usual, too many bury their heads in the sand or totally ignore the letters.

    You bury your head in the sand and suffer the consequences.
    The notice was all out there for everyone who had an endowment mortgage to see, read and hear.
    A statement was sent out annually, other information was also sent out, failure to read and act upon it likes 100% with the people like the OP.
    People need to stop looking for a payout when they fail to act upon information which is given to them.  When all is said and done, it's all of us that end up paying for their failures.
  • Tom13
    Tom13 Posts: 7 Forumite
    Part of the Furniture First Post Combo Breaker
    Thank you everyone for your replies. This has helped me a lot. I did raise the issue of shortfall when I had the chance and OFCOM had come back and said I was not mis-sold. Also when I kept receiving letters saying I will have a shortfall, I had converted the mortgage into repayment. Therefore this lump sum is a bonus. I wanted your advise to help me decide if to just take the lump sum or if I should negotiate. From your replies I can see that there is no ground for negotiations so I will now take the lump sum.

    Thank you all once again.

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