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NU tells clients you&#39re on your own with shortfalls

Norwich Union is mailing its 1.3 million mortgage endowment policyholders, telling them to make their own arrangements over shortfalls despite its much vaunted guarantee.

NU is predicting that 75 per cent or 975,000 policies face shortfalls. In January 2000, it pledged to make good deficits as long as it achieved investment returns of 6 per cent. Returns have been -8 per cent and NU says it will only make up the difference on the originally predicted shortfall.

It is telling policyholders with less than five years to make arrangements to cover shortfalls. It also says policyholders without shortfalls predicted at January 2000 are not covered by the guarantee.

Standard Life offers a similar promise but says its 1.3 million with-profits policyholders are all on target. It will be advising the 75 per cent of 200,000 unit-linked policyholders with shortfalls to make their own arrangements.

Syndaxi principal Robert Reid says: “I think this is a major PR disaster for NU. If you trumpet something as being a guarantee you need to be careful. It is bringing the industry into disrepute – who will believe guarantees in the future?”

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