Standard Life mortgage endowments

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Standard Life policyholders facing bigger shortfalls and more red letters IAIN DEY DEPUTY BUSINESS EDITOR http://www.scotsman.com/   MORE of Standard Life’s mortgage endowment customers are likely to find out that they are facing a shortfall on their policy when they receive their annual statements over the next few weeks. Thanks to the new solvency rules for insurers introduced by the Financial services Authority, Standard Life has had to reduce the amount of policyholders’ money it holds in shares. Although this asset switch allows the Edinburgh firm to give more assurances to the regulator that it will be able to meet the guarantees it has made on certain policies, the switch to safer, lower-yielding bond investments means long-term growth prospects are lower. Earlier this year, Standard Life chief executive, Sandy Crombie, told the Treasury select committee that 86 per cent of the firm’s 1.2 million mortgage endowment policyholders were destined to face a shortfall - most of whom can now expect that shortfall to have grown. The total percentage of policyholders receiving "red letter" warnings indicating that their policy is to face a shortfall is also likely to have increased. A spokesman for Standard Life said: "The simple way to put it is that, yes, in the majority of cases, people will find themselves either with a shortfall that they didn’t have before or with one that has increased. "However, it is entirely dependent on the type of policy that you have and the important thing for policyholders is to wait for their statement to see the full effect on their policy, which will be detailed in full in that statement." Standard Life previously assumed more generous growth in its policies than many of its rivals because, as a mutual company, it does not have to pay a dividend to shareholders. Standard Life policies have outperformed rivals in many areas. In January this year, the payout on a maturing 25-year, £50-a-month endowment was almost £12,000 higher than a similar policy from Scottish Widows - a former mutual now owned by Lloyds TSB. But the new FSA rules prevent the company from assuming that mutual status can guarantee a higher payout. The annual statements have usually been delivered to policyholders by this time of year but the changes which have had to be made to account for the new solvency rules have held up the process this year.

 

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