Norwich Union is urging clients to make their own arrangements over shortfalls on mortgage endowment policies, despite its pledge to guarantee returns.
1.3 million policyholders will be mailed by NU with the news, and it is predicting that 75% of policies, 975,000 in total, will face shortfalls.
In January 2000, Norwich Union pledged that it would make good deficits, as long as investment returns reached 6%. Although returns have been 8%, NU says that it will only make up on the originally predicted shortfall.
Policyholders with less than five years are being told to make arrangements to cover shortfalls, and policyholders who were predicted at January 2000 to have no shortfalls are not covered by the guarantee.
An industry spokesman said that this is a public relations disaster for Norwich Union. He added that it is bringing the industry into disrepute and that consumers will be reluctant to believe guarantees in the future.
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