Tony Bridgland made some very good points in his recent article in Money
Marketing but you do not have to wait 20 years to see that the projection
system is failing and needlessly worrying people.
I have on file two projections four months apart for the same plan, a
25-year low-cost with-profits endowment for a £19,500 mortgage with a
monthly premium of £25.34.
In the first, dated 29/09/2000, the 4 per cent projection shows a
shortfall of £500 with surpluses of £2,000 and £5,700 at the
mid and higher growth rates. In the second, dated 07/02/2001, the three
growth rates show a surplus of £500, £3,800 and £7,700.
Judging by current returns, (which I know we are not supposed to do), you
could add those all together and still be short by a long way.
In the current market, unit-linked plans will virtually all show potential
shortfalls but will that be the case in a couple of years time when the
markets have recovered and all those cheap units bought now have benefited
from pound cost averaging?
WD Gill (Insurance Brokers),