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Underestimating endowment maturity figures

I too am dissatisfied with the current system of projecting endowment maturities (Letters, MM, July 31). The innate futility of attempting to shoehorn a guarantee, accrued annual bonuses, and a potential terminal bonus into a level growth projection of 4, 6 and 8 per cent is obvious.

This is compounded by companies such as Standard Life, Clerical Medical, Legal & General, Guardian and Scottish Equitable, which use the current surrender value as the basis for their projections.

Perhaps the blame lies with the FSA, which has failed to issue clear guidance on projection uniformity.

Thus, in addition to the above, we have Guardian and Scottish Provident refusing to include any notional terminal bonus within their projections – a trait also followed by Scottish Life with regard to its unitised with-profit projections.

In the mid-1980s companies were allowed to project the then current bonus rates, making for fanciful projections. Perversely, today we are in danger of deliberately underestimating these maturity figures. The additional amber and red letters received by policyholders will only add fuel to the compensation claims.

Alan Lakey

Highclere Financial Services, Hemel Hempstead, Hertfordshire


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