The Endowment Diary

The Endowment Diary


The Endowment Mis-selling Debacle - one of the UK's worst financial scandals

Wednesday, February 22, 2006

Good News From The Pru

Good News From The Pru

Those of you with endowment policies, managed by the Prudential, have something to celebrate.

They have announced a 20% return on their with-profits fund, after increasing the equity backing of the £83BN fund from 64% to 74%.

The rise of 17%, after tax, has been passed on to their customers.

Endowment policies rose by over 16%, and maturing policy pay-outs were higher than a year ago.

Ned Cazalet, an industry commentator, said that the performance was "head and shoulders above everybody else a 45% cumulative return over the last six years compared to an average of 20% for the rest".

During 2005, whilst the Pru was adding to its equity backing (equities plus property), Standard Life (for example) was reducing the equity backing of its fund from 50% to 45%.

Standard Life then went on to whine and bleat earlier this month that the reason for their dismal performance was because the FTSE-100 had fallen from 6930 six years ago. Had they been more flexible and better organised they could have taken advantage of the rising market, just as the Pru did.

Almost all of the Prudential's maturing endowments paid off their mortgages last year, and the number of "red" policies off track has dropped from 65% to 16%.

How many other endowments can claim that?

This good performance by the Pru raises some very uncomfortable issues for many of the other life assurance companies, that have been performing dismally:
  • Why have many of the others performed so badly?

  • Why do they continue to blame the markets, when it is clear that it is the management of these funds that is to blame?

  • Why do they continue to pay their senior staff bonuses, when their policies are failing their customers?

  • Why do they make "management" charges on these failing and useless endowment policies, when they are clearly not capable of running them effectively?
These issues should be taken up by the millions of us who are being poorly served by many of the life assurance companies. A class action for mismanagement would definitely bring the issues onto the table, and force a resolution to this growing crisis.

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