What the Press are saying

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Endowment With Profit Bonus Rates ::

The effect on Bonus Rate changes on your endowment

How does a valuation based on current bonus rates differ from my Life Company's projection?
Under the rules of the FSA (Financial Services Authority) your Life Company is only allowed to project the estimated future maturity value of your policy on assumed standard growth rates fixed at 4%, 6%, and 8%. This is only a projection and has nothing to do with the way the Life Company will calculate the actual maturity value. Only at the end of the term will your Life Company calculate the actual maturity value based on bonus rates at that time. EndowmentCheck is using exactly that calculation to work out the future maturity value.

If bonus rates stay the same during the remaining term then the future maturity value will match the actual maturity value. As bonus rates change so does the future maturity value of your policy. We are constantly updating our system with the latest bonus rates of all major Life Companies, allowing us to accurately calculate the future maturity value of your policy based on current bonus rates.

With our online facility you can now check the effect of these bonus rate changes on your policy’s maturity value and monitor them over time.

We at Endowment Check, have priority access to bonus declarations from all major life offices thus ensuring that we always use the latest bonus rates for your maturity calculation.

(Quote from Robin Lloyd – The Endowment People 14.02.05)

”Those who have policies connected with mortgages should act now. Whatever they decide to do with their policy, inaction is not a sensible option. Here are some steps that policyholders could take:

Find out how much shortfall they are likely to have. Life Companies will supply projection figures but these are only one view of the policy. Policyholders should talk to an IFA for a fuller picture. ”The best site we have found for those who like an independent approach is www.endowmentcheck.com. There you can get an illustration of where your policy is against performance required to repay your mortgage as well as information on how future bonus changes will affect your return.

Research alternative options for repaying their mortgage. This could involve taking starting other investments to cover the shortfall, using existing investments to pay off part of the loan, switching to a repayment mortgage or a combination of these.

Find out how much their policy is worth on the traded endowment (TEP) market. The surrender value of a policy is only one value. It may be worth more on the TEP market and this will be an important factor in deciding what to do.”

Standard Life continues to provide strong returns

The declaration from Standard Life continues the trend of the stronger Life Offices by showing strong returns (8.7% annualised on a 25 year endowment) while adjusting bonus rates downwards to reflect current market growth expectations. This is in line with other insurers including Norwich Union who declared last month.

Having declared new reversionary rates earlier in the year, Clerical Medical have also now declared terminal bonus rates for policies maturing in 2005. They have increased terminal bonus payouts slightly on all policies apart from 24 to 27 year terms. This leaves Clerical Medical's performance on a 25 year policy very similar to that of Standard Life and Norwich Union.

In today's market, an annualised return of 8.7% is outstanding given the amount of capital security provided throughout the term of the policy. It is encouraging that Life Offices are also looking to the future by adjusting their bonus rates to reflect lower long term growth as this is with-profits smoothing in action.

Norwich Union and Standard Life tend to lead the way amongst insurers so policyholders with insurers that have not yet declared their new bonuses should expect a similar pattern.

What this means for mortgage endowment policyholders?

Many policyholders with endowment mortgages would need a higher return in order to repay their mortgage at maturity. Policyholders should act now to ensure that they aren't left with mortgage debt at maturity. The best action to take will depend on each policyholder's situation with the most common options being supplementing their endowment investment with other savings or switching to a repayment mortgage. Policyholders who decide to switch can maximise the cash from their endowment by selling it on the traded endowment market rather than surrendering it.

Genuine Testimonials:

"After saving me £3,600 in premiums - Endowment Check proved to be a good investment."