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Standard Life breaks its endowment promise (F.S.A. Guide )

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Standard Life breaks its endowment mortgage promise
By Mortgage Strategy staff
Standard Life last week dropped its endowment mortgage promise, while Liverpool Victoria promised endowment surpluses with zero shortfalls.
Standard Life says: "The capital growth condition required for our promise has not been met, nor do we anticipate it being met in the foreseeable future. Since announcing the promise in September 2000 we have, however, made provisions of approximately £100m each year. The board has now reached the decision that it would be inappropriate to continue making further provisions so long as the capital growth condition continues not to be met.

"So long as it is satisfied that it is fair and prudent to do so, the company currently intends that the existing provisions already set aside for the promise, £393m will be used to pay top ups to eligible customers. Policies maturing between now and December 31 2005 will receive maximum top ups."

Liverpool Victoria has announced that all of its currently maturing mortgage endowment policies are receiving a surplus on top of the mortgage amount covered. In addition, the leading mutual has confirmed its unequivocal guarantee that none of its mortgage endowment policyholders will suffer a shortfall, whatever happens to future investment returns.

Liverpool Victoria's unconditional mortgage endowment guarantee guarantees unequivocally that the maturity value of members' mortgage endowment policies will be at least equal to the policy death benefit, i.e. the mortgage amount covered. Liverpool Victoria has already made a financial provision to cover this guarantee so it will not have any adverse impact on future financial performance. Liverpool Victoria has just over 6,000 mortgage endowment policyholders.

Malcolm Berryman, group chief executive of Liverpool Victoria, says: "The strong performance of our with profits fund has ensured a surplus for all of our mortgage endowment policies that have matured or are currently maturing. In addition, our unconditional guarantee gives total peace of
mind to our members for the future."

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