Endowments - false projections

You need to address your comments to the FSA. It sets the allowable projection rates and when a company does a maturity projection for you it has to take the existing situation and project from there using the standardised growth rates set by the FSA. There's 3 of them, 4%, 6% and 8% and you take your pick as to which one you like - or don't like, as the case may be.

Rob Graham

In message , Jeffrey Smith writes

Its not the Company but the FSA who set out the rules for 'predictions' which the Company must follow, no matter how ridiculous.

Thanks for reply. So how come the predictions are so far out? I have asked this question of the company and so far I have just had acknowledgements that they are 'investigating'. I still think I'm being conned here by someone!!

Anybody else got comments?

Thanks, Rob. Yes, I know that they give the three growth rates. But that doesn't explain why only a year after the latest update the final maturity vale of the policy was so far below even the worst rate! I have asked the company to explain. So far it has taken them ~4weeks - but I have had an acknowledgement letter saying that they are 'investigating' - and that they will write again in no more than 4 weeks with an update. How much 'investigation' does it need?

Has anyone else taken this up with their respective insurance companies?

Thanks,

Jeff Smith

Because the insurance had/have crap investment managers?

But I assume that you did not think that your policy could only increase at

The premium was too low to meet the target amount. But you did not "buy" based on premium did you?

The FSA tells them what rates to use for their projections. These rates bear absolutely no relation to reality, and are only designed to demonstrate the effect of charges on how the policy performs.

There isn't really anything you can do about it apart from campaigning for a change in the law.

'predictions'

Yes, tho' it may not help as such.

IIRC the legal position, the LAUTRO/PIA/FSA standard for projections was expressed as a maximum. IOW advisers could not project higher returns. IMHO that did not prevent them from being realistic.

In practice, it suited them to pretend that it did.

(uk.legal added)

I can't see how that would solve the problem. The under performance is most likely caused by either poor investment management or bad luck (or both).

Thom

"Thom" wrote

So, do you think that if the official rates were 50%pa, 55%pa and 60%pa then any underperformance compared to these 'silly' rates "is most likely caused by either poor investment management or bad luck (or both)"?? I think not!

Obviously, a third reason for the underperformance (compared to the official rates) is simply that the official rates are too high!

Not in this case, IMO. The op seemed to suggest that the endowment was below the low band 4% p.a. projection. Given that cash, bonds or gilts would give you 4% or more over most time periods, I think that luck or poor judgement are the case here.

Even at the height of mis-selling Allied Dunbar were only projecting 12% p.a. after charges.

Thom

"Thom" wrote

None of cash, bonds or gilts will provide any life cover. Do you think the life cover built-in to the endowment was *free*??!

No - but life cover premiums are not _that_ expensive. (I'm also not sure that the projections don't factor in charges - they usually do for other investments). Are you saying 4% p.a. return is an unrealistic return?

Thom

"Thom" wrote

Depends very much on how old you are!

Also, the term can affect things a lot - for instance, if there is a long term, so that size of payments compared to size of loan (life covered for amount of loan) become smaller then the *proportion* of each month's payment going towards life cover increases.

"Thom" wrote

What is never stated is what grows at 4% p.a. It seems to be taken to be the underlying funds, but applied to the surrender value of a policy it often does not make sense. Charges and fees presumably make the difference.