It seems that a staggering 84% of endowment policies are unlikely to reach their target. This figure is likely to grow, as life assurance firms cut their projections.
The projections are likely to fall as the Financial Services Authority has asked all life assurance companies to use lower rates, if they hold less than 70 per cent of their with profits funds in equities and property.
It seems that only Legal & General and Prudential hold almost 70% in equities and property (69% and 65% respectively); the rest fall short.
It is estimated that every 1% reduction in the projection rate will reduce the payout on a £100K 25 year policy, with 12 years to run, by Â£7K.
A nice way to start the week!