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Shortfall alerts rise to 61% for endowments

More than 60 per cent of mortgage endowment policyholders face potential shortfalls under the second round of projection letters, according to latest figures from the ABI.

The ABI&#39s numbers for the quarter ending March 31 reveal that 39 per cent of endowment letters would be green, 26 per cent amber and 35 per cent red, meaning that 61 per cent face possible shortfalls.

This is a significant inc-rease from the same period last year when the numbers were 54 per cent green, 31 per cent amber and 15 per cent red.

The ABI says the sharp increase in potential shortfalls is due to the poor market conditions in the last two years, with the FTSE 100 falling by 16 per cent over that period.

It says it intends to publish figures quarterly to give policyholders up to date information on the outlook for endowments.

According to the ABI&#39s endowment code of practice, providers are obliged to send out projection letters every two years.

The first round started in June 2000 and ended in April 2001, meaning that some pro-viders have reached the twoyear point and are starting the second round.

An ABI spokeswoman says that despite the dismal projection returns, endowments are still a viable savings vehicle for paying off a mortgage.

Rickman Tooze adviser John Haynsworth says: “It does not surprise me that 61 per cent are on course to fall short of their targets.

“The low inflation we have seen has impacted on investment returns. Saying that, endowment policies continue to offer very good real rates of return.”

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