Standard Life Endowment Shortfall

Standard Life Endowment Shortfall

Standard Life has revealed that 93 per cent of its 1m endowment policyholders are likely to face a shortfall on maturity.  Eighty-five per cent of endowment policyholders are classified as red, meaning they face a significant shortfall, 8 per cent are in the amber, meaning they face a shortfall and only 7 per cent are in the green, meaning they are on target.  

Evelyn Bourke, finance director for UK life and pensions for Standard life, said the firm had set aside a mortgage endowment promise reserve, which could potentially pay out £1bn across 500,000 eligible policyholders.

Our view

The endowment promise was a good thing at the time and is still an honourable thing that no others offer.  In short, back in 2000, Standard Life made a promise to endowment policyholders that it would guarantee a return up to 6% on your endowment and make it up to this figure if there was a shortfall.

The reality is that promises can be broken.  Standard Life then changed its stance in 2004 and for many whose policies mature after 2005; the promise was reduced as costs were souring.

The reality is

Standard Life got huge positive PR coverage in 2000.  It is possibly one of the most expensive PR boobs for some years.  No doubt setting aside 1bn is costly enough, but we know by the amount of additional literature they have had to produce and the additional telephone calls they have received, the cost is even higher.

They still are offering a guarantee that other endowment sellers have not, so it is still a good thing.

Useful links:

Got an Endowment Shortfall? Challenge Us or visit the Financial Advice Channel 

Request expert financial advice now

Purchase guidance on financial planning in the Money Shop 

Back to News Summary