More Endowment Worries

Norwich Union has warned that 9 out of 10 of its endowment policies will not cover the repayment of the mortgage loan when they mature.

The Norwich Union expects half of the 69,000 policies maturing this year to show a shortfall. Last year's average shortfall was £1,470, but this was halved because the Norwich Union introduced a 'promise' in 2000. Within this scheme the Norwich Union helps to reduce shortfalls for some policy holders.

Saves with Commercial Union, whose policies are now under the control of Norwich Union, may receive only around £39,000 having paid £50 per month for the 25 year term. This is 10% down on the over £43,500 paid out to a comparable plan taken out a year earlier, in part due to new policies becoming more expensive in 1982.

But these figures are both worse then the almost £49,000 that would have been paid out two years ago to a similar policy, even though the fund that supports these investments grew by 11.7% and 5.4% in the last two years.