Betting on Norwich Union by Finance News Bulletin

Published: 20/02/07

information Companies & markets Investing Power portfolio Campaigns Mortgages & homesMortgage featuresInsurance Consumer advice Broadband & phones departure Saving & banking Credit & loans little business Tax & wills Message boards Money blog Tools & calculators inquire an expert Guides Compare & buyMore than 600,000 Norwich Union savers have been told their endowment rule cannot be relied on to pay off their mortgage

A ONE-MINUTE MAKEOVER If you only have one minute to learn how to sort your money, forget the rest and read this>> Our 8-step planIn its latest appraisal of with-profits bonus rates and payouts the insurer said 90% of its mortgage endowment clientele faced a shortfallThis means that when the mortgage to which the policy at attached reaches maturity, thousands of homeowners could face two very hard choices:• Having to put up for sale up and move to somewhere cheaper to release some of the cash tied up in their house to cover the shortfallNorwich Union has urged customers who have received 'red alert' letters in the history to take immediate act to ensure their home will not be at risk

But along with the red alert they received comforting news about the 'mortgage endowment promise' This is a vow from the insurer to make a refill payment when their donation policy maturesThe key to working out your position today is the size of your shortfall, if any, back in 2000 The shortfall that applied to your policy at that time is the amount covered by the Norwich Union promise

It is significant to note that markets crashed as the new millennium dawned and donation policies, which are linked to the stock market, took a hammering As a result, the deficit picture has become even more bleakOne this is Money person who reads wrote to us with the next question: 'I took out a Norwich Union mortgage endowment policy in 1991 I have been told that it will almost certainly pay £10,000 less than expected when it matures in 2016

Should I pay more each month or can I rely on the Norwich Union Promise to make good the shortfall'Further enquiries show the present £10,000 figure is £4,000 more than it was in 2000, so the insurer's promise will wrap only the first £6,000 The target amount on this policy was only £25,000, which makes the predicted shortfall an alarming 40%astonishingly, perhaps, the average Norwich Union shortfall is only £1,600, but many NU clientele will be facing far better deficits

Norwich Union's endowment promise is based on the presentation of its free reserves If the company is its fulfil its assure, these reserves will have to show a regular 6% return, but they have yet to hit the aimSenior Norwich Union actuary David Riddington admits the promise got off to 'a pretty rocky start' send-off NU with a lot of catching up to doBut although future bonus rates are by no means guaranteed, the corporation appears confident – at least for now

Despite the deprived start, it says the mortgage endowment promise 'remains completely viable' and that it will give customers three years' notice if it is forced to alter itRiddington says those whose policies have many years to run are in the best place to benefit if the stock marketplace recovery continues Their shortfalls could shrink or vanish in total In the meantime, he says customers should consider option ways to tackle the shortfall

These include converting to a repayment method enough of the mortgage to bridge the gap or starting an investment or savings diagram such as a tax-free IsaIf you cannot keep away from a shortfall, there are habits to escape, other than downsizing The Financial armed forces Authority suggests extending the life of the mortgage or, if you are about to give up work, considering an equity release system that will enable you to borrow money without the need to make usual repaymentsHow can they keep on paying such wretched annual bonuses

The stockmarket has been performing well over the last 3 years with it now topping a six year high I thought the whole thought of endowments was to get cream in the good years but my policies have been getting merely skimmed milk for existence now Where's the fairnessTypical NU

Remember this is a promise and not a gurantee The policy must achieve 6% enlargement from the date the promise was made to make sure target is acheived It is obvious that this is not going to occur and the promise is therefore only a partial solutionI have an endowment with NU which was originally put up with visionary Mutual in 1985

I pay £26 p/m and I have no idea what I will recieve when this 'with profits' policy matures in 2010 I only expect it comes close to the speculated amount of £17k© 2007 linked Northcliffe Digital Ltd Terms solitude policy Advertise with us LoansCardsMortgagesInsuranceCompare the most excellent deals around with This is Money

Please choose a loan£ Select a loan term 12 months (1 day 24 months (2 existence 36 months (3 existence 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 existence 108 months (9 years) 120 months (10 years) GO New praise cardPick your favoured card present Please choose 0% introductory rate No annual fee Cashback faithfulness scheme All of the above GO Balance transferPlease select a type of insurance existence insurance Home and contents automobile Breakdown services Health - medical Health

Visit original article: