With-profit returns hit by stockmarket woes

Published by Rebecca Atkinson on 21 February 2008.
Last updated on 21 February 2008

Dominoes falling

The turbulence of stockmarkets in 2007 has hit Legal & General and LV= with-profit policyholders, with both firms revealing a slump in performance during the year.

The fall in returns has been seen across the with-profits sector, with Norwich Union and Scottish Widows also announcing falls.

L&G policyholders saw a return of 5% in 2007, down from 12% the previous year, while LV= funds achieved returns of 5.7% in 2007, down from 11.2% in 2006.

An L&G with-profits fund maturing on 1 March 2008 will achieve a maturity value of £44,966 while a policy maturing on the same date in 2007 made a return of £45,399.

For LV=, an endowment maturing on 1 March 2008 had a value of £61.625, down from the £63,905 achieved by the same product maturing a year earlier.

Mortgage endowments

However, both L&G and LV= mortgage endowments saw better results than some of their peers.

LV= has a mortgage endowment guarantee, meaning that all policies will be paid to meet the mortgage amount regardless of whether they are in shortfall or not.

The friendly society reports that a 20-year mortgage endowment policy will mature on 1 March 2008 with a value of around £71,388, a surplus of £21,388.

L&G, despite not having a mortgage endowment guarantee in place, reports that the number of policies at risk of a shortfall has fallen from 40% of its book to 28%.

A 25-year mortgage endowment policy maturing on 1 March 2008 from L&G will have a maturity value of £43,637, giving a surplus of £12,106.

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