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Three leading mortgage lenders have cut endowment payouts


Standard Life, Norwich Union and Friends Provident are three of the leading mortgage providers who have cut their final bonuses by up to ten per-cent in six months.

In July, Friends Provident was the first to announce the cut with it’s with profits bonus announcement. It showed that there is a clear difference of around ten per-cent between payout received this year in July compared to those which would have matured in January of this year. These figures are based on payouts for a young male aged twenty-nine years at outset, paying £50 every month for twenty-five years.

Standard Life announced shortly after, with similar differences on payouts on mortgage endowment policies, with a drop of around eight per-cent from January to August of this year.

"With-profit funds are supposedly designed to smooth investment returns over good and bad periods, to protect investors from volatile stock markets. However, endowment policy holders have seen little evidence of this protection over the last 12 months, with three of the major endowment providers making significant cuts in bonuses,” said Sharon Bratley’s chartered planner.

“For those already struggling with rising energy and food bills, finding out that the bonus rates for their endowments are reducing, which could potentially lead to an endowment shortfall to cover their mortgage, is just more bad news for people thinking of cashing in their policies back to the insurance company, it is important to explore all the options. Policy holders basically have four choices. They can continue paying into the policy, they can make their policy 'paid up' whereby they keep the policy at a reduced level but stop making contributions to it. They can surrender it back to the insurance company who will offer a price for it or they can possibly sell it to an endowment broker.”

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