If you are one of more than six million people who plan to pay off their mortgage with an endowment policy then you may already know about the problems you could face in the future if you do no revise your payments now. In April you can expect to hear from your lender again with an update on the situation.

So what is the problem?

Improvements in the economy are usually a good thing for investors but the current combination of lower inflation and interest rates, means that your endowment policy may not perform as well as you expected and you may need to put aside more each month to be confident of paying off your mortgage.

For most people, there is still time to make provision. Insurers and mortgage lenders must write to customers with endowments mortgages every two years to let them know whether their investment is on track to pay off their loan at the end of the term.

Look out for the letters

The first batch of these letters - enclosing a factsheet from the regulator, the Financial Services Authority: "Your endowment mortgage - what you need to know" was sent out in January 2000. It was followed that April by individual 're-projection' letters, setting out the expectations for each specific policy, the amount - in pounds - of any shortfall and what you would need to do to make up the shortfall.

The two-year update is due to land on your doormat from this month.

If you have not received a letter and are concerned, contact your insurer. The address and telephone number will be on any letters or papers they have sent you in the past.

Don't panic...

The fact that your endowment mortgage may now have a shortfall does not mean that you were badly advised; nor that you have lost out by having an endowment. But if you would like to make a complaint about the advice you received, the FSA's factsheet, "Endowment Mortgage Complaints" explains how endowment holders should take up any complaints with the firm which sold them the endowment, and how to take their case to the Ombudsman if you are not happy with the response from your lender.

It also includes information about how consumers can seek compensation if they feel they were in any way misled at the point of sale and may have lost out financially as a result.

The factsheet also covers mortgage endowments that extend past the customer's expected retirement date, an area of particular concern raised during the FSA's research in the past year.

FSA Chairman Howard Davies says: "We know that many consumers think they were not given proper advice when they took out their endowments: in particular, that they were not made fully aware of the risks involved in an endowment investment product. That is why we are publishing a new factsheet, which explains how people in that position can take their case forward, and how those with valid complaints might seek compensation".

Remember: Do not cash in your endowments without taking advice.  Do not just stop paying the premiums. If you do, you could lose money.

There are a number of things you can do, so don't panic. Follow these steps recommended by the FSA:

Step one - find all the paperwork

Check how long both the loan and the endowment policy have left to run. If you need to repay the mortgage before the endowment pays out and you are expecting to use the endowment to pay off the loan, you may have a problem.

You need to speak to the firm or adviser who sold you the policy and ask them why the end dates are different. You can ask your mortgage company to extend the term (the length of time the loan runs for). But make sure that, if this takes you beyond retirement age, you can afford to keep up the payments.

Step two - contact your endowment company

Ask them to work out whether your policy is still on target to repay your mortgage. You may be told you have to wait if there is a heavy demand for re-projections all at once. People whose policies are near their pay-out date (called 'maturity') will get priority as they have less time to deal with any shortfall before they have to repay their loan.

Step three - make provision

If it seems that the lump sum you will get from the endowment might fall short of the amount you need when your mortgage term ends, look at ways of topping up your savings.

Find out more

Endowment factsheets and guides are available free from the FSA: 0800 917 3311.
There are several ways for homeowners to make up the shortfall so that their loan is paid off.  

One option is to sell the endowment policy, which is a separate investment from the mortgage loan.  The endowment can be ‘surrendered’ to the original insurer who will pay what they consider it to be worth.  

Because charges – and sometimes early surrender penalties – eat into the money invested, the surrender value is often lower than the customer expects.  

An alternative is to sell the endowment as a second-hand policy through what is known as the traded endowment market.  This allows several firms to have the opportunity to bid for the policy and will often improve upon the surrender value offered by the original insurer.

Around £1 billion of endowments are surrendered each year which could be sold for more on the traded endowment market.

More than 60,000 endowment policyholders are expected to lose as much as £1,500 each by surrendering their policy to their insurer without shopping around.

"If you would prefer to get shot of you endowment, don't go to your insurer for the best value," advises. Tracey Merritt at traded endowments specialists Beale Dobie.  "Those wishing to dispose of a policy could obtain, on average, between 10% and 15% more from a market maker than by surrendering it to the issuing life office."  This means, for example that a £3,000 surrender value offered by your insurer could be upped by an average of £450.  

Some investors have gained more than 100% more through the traded endowment market .  And every penny counts when it comes to securing your home.

Not every endowment is suitable for the traded endowment market. Wayman admits that not every surrender value can be beaten. He highlights Legal &
General and Scottish Amicable as two companies which pay particularly generous surrender values. But he says that between 10% and 40% more is achievable on most offers - and on some policies the gain can be more than
100%. If you are close to the end of your policy term then experts generally agree that you should hang onto it.

Christine Farnish, Director of Consumer Relations at watchdog the Financial Services Authority says:  "Most people who have an endowment mortgage will find that it is doing the job perfectly well. If you're worried that the endowment policy will not grow fast enough to pay off your mortgage in full, don't cash it in without taking advice.

Endowment factsheets and guides are available free from the FSA: 0845 606 1234
For a free valuation of your policy, or for a free guide to
selling an unwanted endowment, call Beale Dobie on 01621 851133 and Policy Portfolio on 020 8343 4567.  For independent advice, contact Endowment Surrender Plus on 01625 433222

Endowment shortfall solutions - Here's how you can get back on track:

  • Continue paying the existing level of endowment premiums while building up another fund to meet the projected shortfall by saving through an Individual  Savings Account (ISA). Contributions into an ISA must be made from taxed income but the proceeds are tax free.
  • Top up your policy by paying extra premiums each month.  Make sure you will not be charged for this and keep it under review to make sure it is solving the problem.
  • Extend the term of your existing endowment providing it matures before your retirement.
  • Change your mortgage to a repayment mortgage, which will provide greater clarity and peace of mind that the loan will be repaid.
  • Make a lump sum repayment to reduce your debt if you have the spare cash. But check you won't be charged and pay just before the end of the mortgage year for mortgages which are recalculated on an annual basis.
Hi F_S :), I have a small 10 year savings plan which pays out in June.  Projected maturity value is around £9,000 to £10,000.  Don't really have any plans for it and would be happy to let it sit in an interest-earning account somewhere.  What would you recommend?  
It depends whether you are likely to want access to some or all of the money at short notice or whether you can tuck it away for a few more years and forget about it.

If you would prefer having it to hand then there are some high interest savings accounts which protect your interest if you give notice of withdrawals.

Examples:  As at 12/4/02, Scarborough Building Society offers a 90 day notice savings account (a bond in this case) for minimum deposits of £2,500.  Interest is 4.75% calculated yearly.  This compares against no notice accounts such as Scottish Widows Bank which offers 4.05%.   Source: www.moneyfacts.co.uk (independent listings).

Alternatively, you could put the money into an ISA (individual savings account) and then your returns on a maximum investment of £7,000 are tax free. Good deals on stocks and shares (maxi) ISAs can be found at fund supermarkets like www.ample.com/isa/ and the current

Cash (mini) ISAs are another option -  you can invest - up to £3,000 in cash; up to £1,000 in life insurance; and up to £3,000 in unit trusts, OEICs, investment trusts and stocks and shares.  Current deals include 4.80% interest with 30 days notice from Northern Rock.

Remember that you can only have one ISA a year and you cannot put back any money you take out.  www.ample.com/isa/ has a guide and tons of basic info if you are new to ISAs - it should be able to answer all your questions.

Bear in mind that any investment in shares carries some risk.  If you are very risk-averse, stick with the savings account or even premium bonds.

Hope this helps.
Thanks for your advice :)  I have examined the options and have decided to put £1000 with the Scarborough.  That should cover a modest funeral 'cos guess where the rest is going....
GS750, although the idea of giggling myself to death is strangely appealing, I'd rather go out pissed on a good single malt with the dancing girls whispering 'thank you' breathlessly in my ear :)


Interesting as the single malt and dancing girls sound, can I just swing this topic back to endowments for a moment...

I have an endowment to pay off my mortgage at the moment, Ive only had it three years and it is for the full amount of my mortgage.

Towards the end of the year I'm looking to move house and buy somewhere bigger.

When I got my first mortgage, I didn't really think too deeply about the repayment options and let myself get talked into an endowment (it wasn't mis-sold I was just naive) however now that I know more about it all I'm not happy trusting the stockmarkets to pay off my mortgage in 22 years time.

At the same time I don't think surrendering the policy will be any good (If anyone would even take it off me)

Are you aware of any lenders who will provide a part repayment part endowment mortgage?

Failing that is an endowment an effective way of developing a long term savings scheme (I can afford to keep paying into the endowment and pay a full repayment mortgage at the same time) or would I just be better off cutting my losses, getting what I can for the endowment and start again with a new mortgage completely?

I think I need a nice single malt after all that ;D

Thanks in advance for any advice.


You are right to think twice about whether your endowment will grow enough to pay off your mortgage at the end of the term.  The truth is that no one really knows - it depends on the performance of the stockmarket and the economic climate over the next 20 years.

You cannot really combine endowment and repayment - if you want to be completely sure that your mortgage will be paid off by a certain date then switch to repayment and either keep the endowment as a savings plan or look at the option of selling/surrendering the endowment as described above.

Before you make any mortgage changes though, find out whether there are any penalties for switching within a certain period.

For the best mortgage deals, check out http://www.moneyfacts.co.uk/
and click on mortgage selections.
FS, have read your posts with interest and amusement.  I sympathise with your poor husband and the apalling training rations and I am touched he has such a concerned and interested wife.

I have just left the Army after 11 happy years and am trying to find a job.  If I manage the impossible in the current climate and secure gainful employment that does not involve the production and selling of Big Macs, flaming tastly dog meat or Kentucky Fried Rat what is the best thing for me to do ref a company pension vs private pension.  Obviously a lot will depend on what is being offered but are there any golden rules?

Grateful for any top tips.
Throughout the eighties alot endowments were sold by "advisers" when on visits to various regiments around germany. Now termed as preselling.

After looking around various sites etc, there doesent seem to be any mention of these with particular ref to HM forces overseas, who I would have thought will feature quite heavily in the miselling/shortfall problems.

Any thought forces sweetheart ??

It's possible that HM Forces overseas became a target as advisers were often looking for a 'captive audience'. But the rules apply in the same way as to any UK citizens.....complain to the firm that advised you and then to the ombudsman if you get no satisfaction. There is a widespread compensation procedure in place for mis-sold endowments so the process should be relatively simple. Let me know if you need more info as it is crucial to get this fixed, esp if you are relying on it to pay off a mortgage.

My old man took out a hatrick of endowments in the seventies or eighties.

A year or two before they were due to mature, the investment company (is that the right phrase?) offered him the chance to bail out for 3 or 4 grand less than he expected to make, saying that if they went full-term they might be work even less.

When the policies finally matured he got two or three TIMES what the investment companies had offered him the year before. And my dad, being the prudent sort, had seriously considered their offer.

It makes me so mad to think what would have happened had he sold up early.

Not sure why I'm telling you this. As a warning, perhaps.

Thanks for that, can't imagine the circumstances though.

FS. What happens should you go all the way with the complaint, and it is successful. And is there anyone reading the forum who has "been there, done that, got the t-shirt" ??
Flog flip.

First for clarity's sake I am not a financial advisor but I am interested in Pensions (Fcuking sad I know), so my advice is a good/bad as the bloke in your local.... :)

If you have left the mob, first find out, if you do not already know, what you will get from the MOD when you are 55. Then find out what the government will give you based upon your employment history to date. You can do this by visiting....


Register and select the pension option or phone 0845 3000 168. They will give an estimate on your second state pension

Okay, you now know what small amount of money you will receive when you retire. Assuming that this will not be enough, you are correct to think about pensions.


Final Salary

If you are lucky enough to find an employer who offers a final salary scheme as general rule take it without question. Sadly most private sector employers no longer offer this benefit, check how to apply on your first day of employment, they often have small windows when you can join.

RISKS: If you think your employer may go bankrupt think very carefully about the risk that they will Maxwell YOUR money.


If your employer offers a contributory scheme, i.e. they match your contributions; these are generally a good deal. You should clarify the charges that the fund makes (more than 1.5% p.a. may dent the final value) but the should not stop you taking the option.

CAUTION: Another point is the how long you anticipate work for a company, most the schemes I have come across have transfer rules. E.g. If you were to leave before 3 years the transfer value is only your contributions, instead of the total value of the fund. It is well worth reading the small print


If your employer only offers a stakeholder scheme or no scheme at all consider the following before commencing any pension scheme.

If you think that you will only be able to save a small amount for the rest of your life because of mortgages/CSA etc issues. Before you rush off and select a pension scheme (They all have significant tax advantages £78 saved by you is matched by £22 from the Revenue BUT The Revenue require you to buy an annuity with at least 75% of the fund. )

In some cases you may be better off saving for your retirement through an ISA although this has risks. As they this would not be protected from bankruptcy and would be considered if you apply for means tested benefits.

I hope that this helps, PM me if you want me to expand on any of the comments I have made.
For FS

One of the main points, as I remember, is that it was very beneficial to take out an endowment before it was needed. Thereby Not paying an endowment/repayment for 25 years, (as was the norm in civvy street), but only start paying for the mortgage once it was required, that is to say, usually when you either left the forces altogether, or bought a property to rent.

As in my case I paid only the policy for'x' odd years, and then used the policy once the building society required it, and henceforth paid the mortgage in tandem.

This is the problem re. compensation, when trying to work out whether I would have been better off not to take out the endowment in the first place.
Or take the normal route and make the choice once having left the services.

Chicken/egg/confused/worried, yes.

Do we have to comm through here or off piste ??
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