85% of Standard Life endowment policyholders face shortfall

by Gill Montia

Story link: 85% of Standard Life endowment policyholders face shortfall

Standard Life has warned that 85% of its endowment policyholders are on red alert, meaning that they are facing a significant shortfall in policy maturity values.

A further 8% are facing some degree of shortfall, albeit not significant, leaving only 7% of endowment policyholders likely to collect sufficient funds to pay off their mortgages.

The company plans to compensate some of its endowment customers using money from a £1 billion reserve set aside for 500,000 eligible policyholders.

Addressing the group’s annual general meeting, Standard Life chief executive, Sandie Crombie, pointed out that despite 2007 having been a difficult year for financial markets, the assurer’s with-profits funds have performed well.

The average investment return over the year on maturing endowment plans stood at 10%.

According to recent research by financial website, Fairinvestment.co.uk, 86% of UK endowment policyholders have been warned that their policies may not provide a large enough sum to pay off their mortgages.

Forty-one per cent of those surveyed were expecting a shortfall of up to 25%.