I have been caught out by Standard Life with their projections of maturity values for mortgage endowments.
I did not realise, until a helpful member of staff gave me the tip, that Standard Life procedure is to:
Calculate the policy cash surrender value,
Then apply a market value adjustment
And the resulting balance is then driven forward at projection rates 4, 6 and 8 per cent.
The result is dreadful – unqualified low maturity values.
In this pessimistic atmosphere, there is no real general explanation of terminal bonus – which could well be more than a theoretical perk following the insurer's lesser liabilities created via the lower actual annual bonus.
Standard Life should present a clear appraisal of its calculations with plus and minus points listed.
The insurer's unfair tactics are also prompting surrenders from those with endowments not linked to a mortgage. These people are getting a cash value quote coupled with a maturity projection.
Despite the addition of future premiums, the maturity value is little more than the current surrender value and so the flow of endowment policy surrenders continues.
When Fred Wollard attacked Standard Life, the insurer's chief executive Iain Lumsden said: “The Standard Life board has a legal obligation to protect its existing policyholders”.
I suggest the board examines all current paperwork and procedures relating to projections and estimated maturity value.
An instruction can then be given for a much clearer picture to be presented to with-profits policyholders.