Unsurprisingly, given the amount of publicity, endowment policy holders are well informed about the possibility of shortfall, says new research. Strangely however, no policyholder spoken to in the research felt they faced real financial difficulties due to a shortfall.

That could rather depend upon your idea of ‘financial difficulties’ or on which stage of the endowment life you are at. The results of the survey make interesting reading, however.

The research by MORI, carried out on behalf of Norwich Union, into the views and attitudes of endowment policyholders across a range of providers in the industry has shown that:

• The vast majority of policyholders (96%) say they have heard about the current situation with endowments, with 78% mentioning shortfalls and/or recent performance as being their understanding of the key issues.
• The majority of policyholders (53%) still remain confident that their mortgage endowment will hit its target amount at maturity.
• 36% say they think this is unlikely.
• Where a shortfall was anticipated by policyholders, the average amount of shortfall was £7,661.
• No policyholders felt they faced real financial difficulties due to a shortfall in their endowment policy.
• One policyholder described the situation as causing ‘shattered dreams, rather than financial nightmares’.
• Most policyholder disappointment stems from the potential loss of the hoped for tax free lump sum.
• Of those who felt that they might be facing a potential shortfall, 70% had either already taken steps to deal with the situation, or intended to do so.
• None of the policyholders said they would be panicked into surrendering their endowment policy at a loss.
• Once the impact of house price increases in recent years is considered, 59% of people say they are either ‘not very concerned’ or ‘not concerned at all’ about their endowment policy’s ability to pay off their mortgage.
• Consumers appear focused mainly on cash and property at the moment to secure their future, until they have more evidence that equities are a better bet than in recent years.
• The majority of policyholders had not been using the money saved on their mortgage repayments to set up a separate savings plan or to reduce their mortgage debt – most (53%) had simply spent it.
• Only 8% had repaid mortgage capital.

Commenting, Mike Urmston, Chief Actuary at Norwich Union said:

“The vast majority of people are aware of what is happening with mortgage endowments and are satisfied with the communications they are getting on the subject.”

“This research also highlights that whilst there are some concerns out there amongst policyholders, as you would expect, the majority of them facing a shortfall say that the situation will lead to disappointment rather than financial hardship.”

“Confidence in equities comes across as being low at the moment. The fall in world stock markets and the slump in investment returns are something that don't just affect endowment policyholders - they affect all investors. What we need ultimately is a sustained improvement in the markets and the return of investor confidence in equities.”

“At the end of the day, the same external factors that have hit investors hard have also resulted in the lowest mortgage rates for more than forty years. Many homeowners are already using some of the money saved on their mortgage interest payments to repay some of their outstanding mortgage debt or to start a separate savings plan. This is sensible, as doing nothing is no longer a realistic option for those facing a shortfall but with only a few years left to run on the policy.”

Who's 'unconcerned'?

One worry is that the study could be highlighting the potential problem that many endowment mortgage holders will not realise that their policy will not deliver in accordance with their expectations until it is too late to complain. Time is already running out to do so.

For the rest who have no legal reason to complain, the loss will still be there. Not just shattered dreams, not even a scary nightmare. Shattered lives will be a reality for many. Particularly those who have seen endowments as a top-up to pensions which are linked to failing shares too.

Of course, it could be that the level of ‘unconcern’ is more to do with having certain items of anatomy firmly gripped by the investment companies. Wriggling is painful whichever way you turn. The unconcern then is more with the gripper than the gripped.