Standard Life admits 930,000 endowment shortfalls

20 May 2008 / by Rachel Mason
Standard Life has confirmed that 93 per cent of its estimated one million endowment policyholders will face shortfalls on maturity, with 85 per cent classified as red, which means they face a 'significant' deficit.

Standard Life could not give a total shortfall estimate, but said that a further eight per cent of endowment holders are classified as amber, which means they will face a shortfall, while just seven per cent have been labelled green, meaning they are on target for their policies to cover their mortgage.

The news backs up a recent Fairinvestment.co.uk poll which revealed that 86 per cent of endowment policyholders were expecting their endowment policies to fall short, with 23 per cent expecting a deficit of as much as 50 per cent and a further 41 per cent preparing for a 25 per cent shortfall.

Speaking at a press conference following the Standard Life AGM yesterday, Evelyn Bourke, finance director for UK life and pensions said that Standard Life had set aside a mortgage endowment promise reserve which could "potentially pay out £1bn across 500,000 eligible policyholders", but said she did not have a total shortfall figure.

"We don't add up the [individual] projections because it is not a number we need in our financial systems and it is not a number that pops out of any of the financial reporting we do," she said.

Commenting on Standard Life's announcement and the Fairinvestment.co.uk poll, Sharon Bratley, chartered financial planner at Fairinvestment.co.uk, said. "This just goes to show what a let down endowment policies were and still are," and warned those who are expecting a shortfall and have not yet done anything about it to act now.

"There are a number of options open to investors," she said, "one of these being to sell the policy. For those sitting on their endowment it might not be too late to sell; there are still plenty of investors out there who see endowments as a desirable asset.

"Alternatively, if you feel the risks associated with your endowment policy were not explained sufficiently at the time, you could have grounds for complaint and be eligible to file for compensation."

Fairinvestment.co.uk offers both selling endowment and endowment complaint services.

© Fair Investment Company Ltd