How's your endowment?

By Daily Mail Reporter
Updated: 18:00 EST, 30 September 1999

View
comments

Thousands of homebuyers have found out that the endowment mortgages they took out weren't as safe as they were led to believe. Many policyholders have been advised to top up their monthly payments because the endowment is not going to pay off their mortgage. This is especially galling as most of those sold endowment mortgages were advised at the time that not only would they have enough to pay off their mortgage but they'd also have a lump sum on top. Here Money Mail surveys Britain's biggest endowment providers and asks them where their policyholders stand.

Abbey Life: Expects some of its savers sold policies since 1984 to have to increase their payments. Cannot say how many. Allied Dunbar: Has written to 180,000 policyholders but as yet, does not know how many have a shortfall. Axa Sun Life(including Equity & Law): Writing to its 200,000 customers. Already warned 10,000 customers including many who bought ten or 15-year endowments between 1985 and 1990 that they will probably need to increase payments. Britannia Life: Is reviewing its 100,000 endowment policies. Customers will receive letters by end of year. Expecting some shortfalls. CGU: Has reviewed most policies. No shortfalls so far. Colonial: Warned 110 policyholders who took out their policies between 1993-94. Says 'it is possible' more will be warned of short-falls. Co-operative: No shortfalls. Eagle Star: Warned 88,000 people who took out policies between 1978-95 they need to top up. Equitable Life: No customers with shortfalls. Friends Provident: Already warned several hundred customers of shortfalls and expects to give the same news to more customers in the future. Guardian: Nearly one in three people with unit-linked endowments have had to top up their savings by an average £10 a month. Tens of thousands were sold to Nationwide borrowers when Guardian was tied to the society between 1990 and 1995. Legal & General: A 'handful' of policyholders have been warned of shortfalls. Norwich Union: Has warned 'just under 2,000' of its unitised-with-profits policyholders, who took out policies about ten years ago, they may have a shortfall. NPI: Warned all its 3,000-3,500 mortgage endowment customers they may need to increase premiums. Pearl: Writing to 120,000 people who bought policies in the late Eighties and early Nineties - a 'significant number' will have shortfalls. Says no others with shortfalls. Prudential: Warned 7,000 customers with Plan 100 they may need to top up. Claims the rest of its 300,000 customers endowments are on track, although some of those who bought policies in late Eighties/early Nineties may need to increase premiums in the future. Royal London: No customers with shortfalls. Royal & Sun Alliance: Has warned about 25,000 out of 250,000 Royal Life customers who took their plans out in the late Eighties to early Nineties. Yet to review Sun Alliance plans. May be more warnings in future. Scottish Amicable: Has written to all policyholders who took out policies since 1991. 'Some' may have to make top-ups. Scottish Equitable: Has between 7,000 and 8,000 mortgage endowment customers and is writing to all over the next few weeks. Some may be advised of a shortfall and are most likely to be those who took out policies in the late Eighties/early Nineties. Scottish life: Has written to 11,000 standard with-profits policy-holders and 15,300 budget plan policyholders since June 1997. About half advised they needed to increase premiums or terms. Scottish Provident: Has written to 990 people who took out ten to 12 year policies in 1993 and 1994 and in the 'vast majority' of these cases, the policyholders will need an annual growth rate of more than 8% to reach their hoped for projection. Longer term policies being reviewed. Scottish Widows: Has not identified any customers with shortfalls yet, but in process of reviewing all policies. Standard Life: Has warned 'about 100' policyholders who have taken out its unitised-with-profits polices since 1991. Says there will be more in the future. Sun Life of Canada: No customers with shortfalls.

What you can do
•Write to your endowment provider asking for a progress report. If it's linked to a mortgage, ask if it's on target to pay it off.

• Don't take out a new endowment or top up.

• Instead, think about taking out an individual savings account (Isa) for tax-free savings to cover any shortfall.

• If you are approaching retirement then consider a cash Isa which is risk free.

• If you're younger then think about a share Isa. Although the value of shares will go up and down, historically shares outperform cash. And a share Isa is likely to do better than an endowment partly because the charges are lower.

• Don't surrender your existing endowment. Unless you hold your endowment to maturity, you won't get the full growth.

• Think about converting part of your loan to a repayment mortgage.

• Consider using some of your savings to pay off part of your homeloan.