View more on these topics


I have crossed swords with the national press more times than I can remember in defence of the endowment mortgage.

This has included skirmishes with financial journalists working for the so-called quality press, whose argument is based on little more than the fact that somebody has earned commission and, therefore, it must be a bad thing. You would not believe the fees that some of these "informed" scribblers receive.

So it came as little surprise when I spotted these words in the Telegraph last week: "…a housebuyer needs an endowment policy like a fish needs a bicycle…"

Here we go again, I thought. But, for once, references to commission were absent. Just for once, City Comment had a valid point.

It went on to talk about the likely downturn in payouts, as forecast by the Institute of Actuaries, which is not exactly famous for being a barrel of laughs. Current high performance is down to low inflation and the boom in share prices but it won&#39t last, etc, etc. Furthermore, there is a danger that some policies will not do what they were taken out for, – pay off a mortgage. However, I thought we all knew that.

I have seldom been able to get the press to accept what is the root cause of this possible failure.

The undiluted blame will rest on the heads of those who sold, in great quantities, low-cost endowments with premiums diluted watery thin with term insurance elements, so as to make them competitive with repayment mortgages on monthly costs. They then needed dazzling investment performance to make it all come true.

By far the biggest culprits were the building societies and banks. I have had many a lunch with a bank manager friend who is in constant hot water for not selling enough endowment mortgages.

Let us get one thing straight. A properly arranged endowment mortgage is a luxury product. Sensibly funded, the monthly cost will exceed that of a similar repayment mortgage by a fair chunk.

Before the low-cost version was invented, you had to arrange an interview between a client and their bank or building society manager to establish that the former should be allowed to have an endowment mortgage.

But once lenders got the scent of a few bob in it for themselves, they smartly changed their politics.

The use of a full-cost endowment means that the mortgage is guaranteed to be paid off. To take a few simple figures by way of example, at 8.7 per cent interest and ignoring tax relief, a 25-year, £50,000 repayment mortgage costs £413.93 plus, say, £11.50 for life cover for a male non-smoker aged 40 next birthday. Total, £425.43.

On a proper endowment mortgage basis, the cost will be £362.50 interest plus £188.50 premium – £551.00 (Standard Life premiums. Source: Money Facts.)

Leaving aside all the other advantages of an endowment mortgage, Standard Life is paying £398,000.82 on a similar policy maturing this year, that is, £348,000.82 pocket money to the borrower.

Even if we do see a bit of a downturn, I reckon that on this basis the IFA will have earned every penny of his commission for good advice. So belt up, you envious scribes.


Newsline spotlights Bupa staff cuts

Newsline reported Bupa cutting its commission-only private medical insurance salesforce by nearly half. Press *News# for the latest industry news.

Uneasy bedfellows

The esteemed Mark Wood, Sun Life & Provincial chief executive, seems to have been on one too many management courses. Wood and other bosses at Axa Sun Life addressed staff last week against a background of low morale and vituperative staff memos. But Wood&#39s attempts to calm staff backfired, it seems. Wood revealed that the […]


Sun Life&#39s high-profile Putting IFAs In Front ad campaign has ruffled one or two feathers at Norwich Union. For some time, NU has put the slogan Putting the IFA First on its ads. It accuses Sun Life of stealing its thunder. NU trade marketing manager David Czerwinski says: “We have been running IFA First for […]

Triple choice from Bristol & West

Bristol & West has introduced three new guaranteed equity- linked accounts to the market. These are designed to provide the choice of capital growth or a combination of income plus capital growth with no risk to the original capital. The bonds should appeal to the risk-averse investor and may have a wide appeal as the […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm