You should receive an annual plan update or re-projection letter giving you an update on the performance of your plan. If you no longer make any payments to your plan, then you may not receive an update letter.
The letter tells you whether your endowment is on track to meet its target amount, or if it’s likely to have a shortfall. Our long-term assumption for performance of the with-profits fund is 3% each year. We regularly review whether these assumptions are appropriate. We also include an illustration at a lower rate of 0% a year and a higher rate of 6% a year. For unit linked plans that can invest in other funds, we use a range between 1.5% and 7.5% a year as these rates are appropriate for funds with a high equity or property content.
Our regulator, the Financial Conduct Authority (FCA), requires that unless a plan is guaranteed* to pay the target amount, plan update letters are colour-coded red, amber or green to indicate whether plans are likely to meet their target amount. These alerts are shown in red ink at the beginning of the letter sent with the plan update. These illustrations are based on our current charges and other assumptions affecting plan returns, which could change in the future. If annual investment returns are less than the ones illustrated, there is a risk that your endowment plan may pay out less than the potential return shown in the plan update.
- A 'green letter' means that your plan is currently on track to meet its target amount at maturity at the intermediate rate(s) of assumed long-term growth.
- An 'amber alert' means that your plan is at significant risk of not meeting its target amount at maturity at the intermediate rate(s) of assumed long-term growth but is on track at the higher rate(s).
- A 'red alert' means there is a high risk that your plan will not reach its target amount at maturity at any of the rate(s) of long-term growth used in the illustration.
It is important that you check each plan update or re-projection letter, even if the plan has so far been on track. This is especially important if your plan is close to maturity. You will need to continue checking the projected value until the end of your plan term.
Information available from the Money Advice Service
The government set up the money advice service to help consumers manage their money better. They give clear unbiased money advice so consumers can make informed choices. These links give more information about mortgage endowments and guidance on things to consider on ‘How to make up a shortfall’.
Their booklet called ‘Dealing with you mortgage shortfall’ is sent with your yearly review letter.
*Some conventional plans guaranteed to repay the target amount (assuming you made all the payments due). The guarantee is lost if payments are not increased when we recommend it. Your plan update tells you if your plan has this guarantee.
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