Unfortunately for homeowners with endowment mortgages, payouts are expected to be much less than expected this year. This is due in part to the housing crunch and some home owners who are relying on their endowment mortgage for retirement money may be left high and dry. Those with this type of home loan are being urged to consider their other options, to avoid financial insolvency. Ned Cazalet from Cazalet Consulting noted that, “If we deduct 1 per cent charges and some tax that gives us a return of somewhere between 2 per cent and 3.5 per cent. Customers have to ask themselves what growth assumptions were used when they took out an endowment or pension. You can be sure it was a lot higher. It’s not difficult to see that most of these contracts will not achieve anything like what the policyholders were told they would.” Other analysts agree. “Investors should be asking themselves whether to keep these policies or get rid of them,” says John Porteous of BDO Stoy Hayward Investment Management. Insurance companies however do not agree. “When you consider what a volatile year this has been on the stock market, payouts have held up well,” says David Riddington, a senior actuary at Norwich Union. “There has been great uncertainty over share prices, and commercial property has not performed significantly. I would argue that against that background policyholders have done well.”
Related reading: Endowment Mortgage
Comment on this article