Endowment policies fall woefully short


In the 1980s and 1990s, endowment policies were widely regarded as the best way to repay your mortgage.  At the time, there was no reason to think otherwise.  How things change in a couple of decades.  High charges and plummeting stock market returns mean that such mortgage savings schemes have, in many cases, become practically worthless.

Now, both Scottish Widows and Legal & General have announced that they are to cut endowment policy payouts in 2013 by 10% and 9% respectively – despite a 6.3% rise in the FTSE 100 in 2012. They are not the only ones. The maturity value of the average endowment policy taken out in the late 1980s is now typically worth only about 25% of the projected value – leaving a woeful shortfall. In fact, figures calculated for Guardian Money by Nationwide building society show that if homebuyers had simply put £50 a month into the best available savings account, it would now be worth much more than many endowments have delivered. Hindsight is valuable commodity.

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