Yes, some accidental keystroke posted before I’d finished!
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Thanks HH. That is good to understand.
I have a few more years, as an 51, before I get there but worth a timely review to ensure I get as much as I can into the pot
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just keep shovelling it in there
This is a good starting point I think. It’s really easy to understand.
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Ugh, don’t get me started.
It’s not a market I’ve ever worked in but the deals I saw people with 10-20 years ago, from high street banks, were often amazingly awful.
I believe there are much more ‘normal’ deals around right now whereby the terms are much more palatable.
I would follow normal procedure and in the first instance register a complaint with the seller/adviser firm.
If they don’t help to the preferred extent then take it through ombudsman, the seller has to give you details on how to do this, though be prepared this can take up to 2 years!
There was never anything wrong with an endowment per se, it’s just a combined investment and life assurance product, with some tax efficiency that was very useful before the wider availability of collectives (which really took off with the facility to PEP/ISA them).
The problems come when the owners expectations of the product they’ve bought are so unrealistic that it’s extremely unlikely to fulfil those expectations.
As usual, much of it comes down to a mix of poor understanding and greed on the part of the consumer, seller and provider. With an additional factor being that some products and some funds are appalling and some products have limited fund choices if you want to adjust.
They were like any other product range in any other market place, there were some really good ones, used wisely and some really awful ones, used unwisely.
Personally, I feel many consumers got off lightly as invariably I saw they’d selected the cheapest option, the one least likely to meet their need, rather than the most suitable which would have been far more likely to work out, yet was discarded because it would ‘cost’ say £100 pm instead of £70.
Similarly, many firms were lucky not to be closed down given the way they shovelled so much sh*t, particularly some estate agent chains.
As to the whole ‘mis-selling’ thing, well I’m sure many were and I know many weren’t, as when discussing these, people would openly tell me they had such a thing in the past and took the offer of free money, even though they didn’t think they’d been mis-sold anything.
There are many other factors that impacted on apparent and actual lack of performance for many of these, far too many to go into here but by and large many more would have worked out with decentish investment results if left alone, perhaps not always as much as was expected however.
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Knowing how biased I am now against this industry, I enjoyed reading your comments and appreciate your input. Certainly I was greedy in expecting a healthy pay-out from our first 25 year endowment policy but that was promoted to me year-in, year-out for 15+ years. Said policy’s failure to meet even the capital value of the mortgage to which it was linked, was a kick-in-the-teeth.
Our first property, mortgage £29,925 secured on an endowment policy with guaranteed pay-out of approx. £22k.
Rather than take the, then, standard MC80 plan I opted for a LC60 plan which cost us a few extra pounds every month. And every year we had the annual statement disclosing the annual bonuses and we watched the fund grow. I created an Excel worksheet to show the projected amounts based on the existing bonus rates and stated terminal bonus rates. Okay, not guaranteed but promoted year-on-year …
Two years before maturity the accompanying letter was Green. Twelve months later it was Red and my projections of a big pay-out fizzled … we were left with a shortfall of approx. £6k
Meanwhile our second plan (this time a MC80 plan as we were short of funds) failed to a greater extent, percentage-wise.
And a few years’ prior, the Life Assurance Company went Public, no doubt making a lot of executives and advisers very rich.
The company failed to provide explanations (we received bland standard replies about falling investment returns) but at least we did receive some free shares from the flotation which enabled us to recover a portion of our losses.
Ironically (perhaps annoyingly) when we took out that first policy I did so through my cousin who was then acting as an agent and I recall asking him what would happen if the maturity proceeds failed to meet the mortgage owing. His reply? It would never happen. If this company failed then it would be out of business. What he/I failed to consider was the scenario in which all such providers failed.
The fact that consecutive governments allowed/promoted these schemes adds to my annoyance.
Your post sums up why I grimace when I hear suggestions of ISA/PEP-linked mortgages, or any other ‘investment vehicle’ for that matter, as all these sit as market exposed (cannot viably be converted to/held as cash) to the point the underlying debt needs to be addressed/repaid.
With additional voluntary contributions to pensions (on the basis you want to take these out as commuted cash on retirement), the advice is to convert to cash in the run-up to retirement (last 3/4 years), so trying to avoid a material market reverse. Some used to recommend going in to short-dated Gilt funds but even these have suffered material volatility and price depression of late.
Unless there are compelling reasons not to (i.e. there is a highly secure repayment source in the background), I’d always subscribe to having a flexible repayment mortgage.
Standard Life by any chance?
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Funnily enough, I’ve never had anything but an interest only mortgage and still wouldn’t have a repayment loan.
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Good article HH. Thank you for sharing
I couldn’t possibly comment … 
Well, a couple of interesting things about Standard Life, they were for some time one of the good guys in the industry among life companies, imo.
They resisted demutualisation but were targeted by a number of groups (remember carpet bagging?) who became members and eventually managed to force through a vote, which went against retaining the mutual status and pretty much since that point they begrudgingly lost their way until now they’re a completely different fish, part of Phoenix (…Spit…)
On a tangent, I’m assuming you invested through their With Profits Fund, most people did, instead of the more flexible unit linked funds. If so, you got done up by the regulator I’m afraid.
Remember, the point of a 25 year WP endowment was to give a decent result 25 years down the line, not an annual step up.
However there was a sea change in perception that somehow higher, perhaps unaffordable, annual bonuses were a good thing and much of the WP industry became competitive in this manner, trying to attract more investors. Standard Life didn’t join in that race but other firms were advertising how ‘great’ they were with silly annual bonuses of something like 6 or 7%. Completely inappropriate for these types of investment.
The regulator took a look, decided they knew best and told many companies to change how they ran their With Profit funds.
St Life, hadn’t been party to to this silliness, and had a pretty decent history on these products, with a 60-70% equity content, giving lowish annual bonuses but very good long term results in the form of a high final bonus at maturity. Just like they were supposed to.
However, at the time of the financial crisis, when equities were on a historic low, the regulator told St Life to de-risk their fund and reduce their equity content to nearer 30-35% and replace them with bonds.
St Life essentially said ‘You’re joking right?’
Regulator said ‘We’re not.’
St Life asked again, ‘So you want us to sell half our equity content while prices are at a historic low and buy interest bearing assets instead, just as we forecast interest rates are going to fall though the floor?!’
‘That’s not our problem, you need to ‘de-risk’ your fund’
‘Fk off’ said St Life
‘Do it, or we take it further’ said the regulator.
And bang went Standard Life’s With Profit fund.
Good huh?
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Jamie. Working for an authorised investment management business in a fairly senior position nothing you say here surprises me in the least. I am not in the field of giving advice but have met a lot of advisers over 35 plus years in the industry. I am always interested in reading your comments on such matters and suspect your clients benefit greatly from your experience and wisdom.
Thanks very much. 
Folks do seem to prefer a direct assesment…
Very interesting reading … I’m not sure if this information would have altered anything had we known 15 years ago but I might have re-directed my anger
Of course, short of terminating either/both the policies early I wasn’t aware of any other action we could have taken and letting each mature was, for us - then - the only viable route.
But we were lucky … many thousands of homeowners were more severely affected.
I’d like to say that it opened my eyes and to some extent it did as I handled our investment decisions for a few years playing the stock market but …
… bringing this thread back to its subject of retirement I have left my (small) pension fund in the hands of one of the big players and keep my fingers crossed that the low-risk strategy (approx. 15% cash, 85% managed fund) will protect it whilst I consider options.
Thanks again for your insight … much appreciated!
My low cost endowments matured nicely and with sufficient to pay the (already paid off ) mortgage.
I was actually employed by the provider - and we were castigated by IFAs and the financial press over a number of issues. In fact at one stage , we were far from glamorous in the eyes of advisors - and few looked into the matters closely . It was always the provider that provided the best quote and the highest surplus.
One very large pensions consultant fired an analyst for suggesting that Equitable Life were overselling
I suspect the vast majority of advisors are no longer trading - and that few policyholders have the relevant paperwork .
I stopped working last month at age 58, and although I’ll probably do bits and pieces I won’t have a regular income. I plan to start drawing my private pension next year when I’ll be 59.
I’m planning to draw potentially up to 5%/ year from it until state pension at age 67 and then reduce the draw down amount to perhaps 3% (my wife and I get to 67 within a year of each other). I expect I’ll never run out of money at that rate, and very likely leave some for my children. That will give my wife a I a lot of spending power, probably more than we will need.
So the answer to your question is you need enough money in your pension pot to cover your lifestyle at a reasonable drawdown rate.
with a following wind - 4 or 5% annual drawdown should mean the well never runs dry
Good recommendation, I plan to retire in the nest six months (I’ll be 63) I found this book really thought provoking