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What value is an illustration?

In 1978, a friend effected a 25-year low-cost Standard Life with-profits endowment policy at a monthly premium of £16.52.

This month, the policy matures at £18,123, an investment yield of 9 per cent free of tax, ignoring the premium tax relief.

In February 2003, Standard gave written confirmation of “illustrative maturity values” as:

@ 4% pa return £14,500

@ 8% return £14,900

The £18,123 amount is 22 per cent higher than even the 8 per cent projection.

Standard clearly cannot give anything near an accurate return even five months from a maturity date. What belief should be placed on current Standard mortgage endowment policy illustrative maturity values?

MP Ward

Chartered insurance broker,

MPW (Carlisle), Carlisle


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