Why is there an Endowment shortfall?

A shortfall in your endowment is a terrible thing to have occurred. Endowment mortgages became popular in the 1980’s and continued to be sold during the 1990’s as it combined a vehicle to repay your mortgage along with life assurance, which would repay the loan in the event of your death. It was common practice to show in illustrations the level of current bonuses along with any terminal bonus. This gave the impression that there would be sufficient funds to repay the mortgage and provide a sizeable lump sum in addition. A similar picture was painted with unit-linked endowments and sales people often combined the illustration with a copy of a fund bulletin. As many funds had strong investment returns, prospective clients were led to believe that there would be a cash surplus available to them after the mortgage was repaid.

The economic trends over the years have changed dramatically. Interest rates in the UK in recent times have fallen to their lowest levels in forty years. In the period from the end of December 1999 to March 2004 the UK stock market (as measured by the FTSE 100) fell by 50%. As the bonuses and investment results were linked in part to these indices, your policy is now under-performing and there is a shortfall.

You cannot complain about this endowment shortfall unless;

• the investment risks were not explained to you or
• the sales person did not check your attitude to risk or
• you were told it would definitely repay your mortgage or
• you were told it was guaranteed to repay your home loan or
• a fact find was not completed or
• the term of the mortgage is longer than the term of the policy or
• the mortgage will be outstanding after you retire

Can you complain about the shortfall? Complete our questionnaire to find out.