Endowment losses

paul75_2

Hi all,

Hopefully the right forum but I have a query regarding recent endowment policy performance. Many years back I took out an interest only mortgage and the endowment policy policy to cover it. 

My endowment policy has matured and has gone from more than covering my mortgage 3 months ago when I spoke to them to check the value, to having a £900 shortfall (it's lost £1200 in 3 months). Obviously, I'm aware that the policy is linked to the stock market, but has the market performed so badly in the last 3 months that I should have expected this at such a big (to me) rate of loss. Do the insurance companies take a big slice from your policy at maturity? I'm looking for a reason that it's lost some much so quickly.

Thanks in advance.

P.

housebuyer143

paul75_2 said:

Hi all,

Hopefully the right forum but I have a query regarding recent endowment policy performance. Many years back I took out an interest only mortgage and the endowment policy policy to cover it. 

My endowment policy has matured and has gone from more than covering my mortgage 3 months ago when I spoke to them to check the value, to having a £900 shortfall (it's lost £1200 in 3 months). Obviously, I'm aware that the policy is linked to the stock market, but has the market performed so badly in the last 3 months that I should have expected this at such a big (to me) rate of loss. Do the insurance companies take a big slice from your policy at maturity? I'm looking for a reason that it's lost some much so quickly.

Thanks in advance.

P.

Yes, the stock market has been doing badly for a while, and especially since the mini budget when many financial services like banks saw their stock free fall even if they themselves were doing well. That would tie in with your 3 month drop. 
My pension isn't doing great at the moment for the same reason. 

silvercar

I thought that endowment policies were meant to move to cash in the last few months to avoid this situation. What does the provider say?

dunstonh

My endowment policy has matured and has gone from more than covering my mortgage 3 months ago when I spoke to them to check the value, to having a £900 shortfall (it's lost £1200 in 3 months).

2022 was a negative year for investments.   It stepped down over the year with a low in June, then a rise over summer until a bigger drop in October.  November as a good positive month with early December down slightly but late December and YTD going up nicely.

Obviously, I'm aware that the policy is linked to the stock market, but has the market performed so badly in the last 3 months that I should have expected this at such a big (to me) rate of loss

You have given us no figures for us to say whether the loss is big or not.    However, a fall over 2022 is expected.  Some people have seen as much as 30% down.

Do the insurance companies take a big slice from your policy at maturity?

No

I'm looking for a reason that it's lost some much so quickly.

Early part of 2022 was inflation and Russian invasion of Ukraine.   Later part of the year was the run on Gilts creating the biggest period of loss in over 30 years.   Although Liz Truss cannot take all the blame as Sterling was already heavily in decline beftore she was Prime minister and has carried on since having the worst year in 100 years.      However, this way always going to unwind at some point.  It was just expected to be much slower (over decades) and not 15 months.

I thought that endowment policies were meant to move to cash in the last few months to avoid this situation. What does the provider say?

Lifestyling risk reduction is not that common on endowments and 2022 has been a year when low risk assets, that lifestyling would have moved into, actually lost more than equities.  For such a bad year, the lowest risk profiles lost more than the highest risk profiles.  Usually it is the other way around.

FlimFlam01

paul75_2 said:

Hi all,

Hopefully the right forum but I have a query regarding recent endowment policy performance. Many years back I took out an interest only mortgage and the endowment policy policy to cover it. 

My endowment policy has matured and has gone from more than covering my mortgage 3 months ago when I spoke to them to check the value, to having a £900 shortfall (it's lost £1200 in 3 months). Obviously, I'm aware that the policy is linked to the stock market, but has the market performed so badly in the last 3 months that I should have expected this at such a big (to me) rate of loss. Do the insurance companies take a big slice from your policy at maturity? I'm looking for a reason that it's lost some much so quickly.

Thanks in advance.

P.

How much is £1,200 compared to the final payout value?  Clearly it's performed well if you are still making the same payments as on day 1.  If you're getting £80k then £1,200 change is a small amount but if you're getting £10k then clearly it's a much bigger drop.

Possibly the terminal bonus being reduced?  Who was the provider?