Standard Life has suspended its mortgage endowment promise, potentially hitting 600,000 policyholders who suffer a shortfall.
The promise was conditional on Standard increasing its free capital from its level in September 2000. However, the firm says poor investment conditions over the last four years mean it cannot justify making further provisions towards the cost of the scheme.
The promise was introduced in September 2000 with the aim of providing support to customers whose policies were likely to fall short of the target amount at maturity. Standard promised to top up their payouts to the amount targeted.
Around 600,000 policyholders will be affected by the decision. Customers with endowments maturing before the end of 2005 will receive the full amount promised and top-ups will then be reduced gradually.
The move comes as Standard prepares for its demutualisation vote in 2006.
Standard has also announced that it will apply time bars to complaints on mortgage endowment policies for which it was responsible at point of sale, including tied representatives at Halifax, Bank of Scotland and its direct salesforce.
Customers must now make misselling complaints within three years of receiving their initial red warning letter. Standard says it is only fair that a customer acts within a reasonable time period.
Standard also says its life and pension restructuring has reduced staff numbers by 1,700 since November 2003.
Head of corporate communications Graeme McEwan says: “The changes announced will strengthen Standard Life's position while balancing the interests of all policyholders.”