How endowment shortfalls develop
This content applies to England only.
Housing laws vary between England and Scotland. Get advice relating to Scotland
This section explains how endowment shortfalls can develop.
The success of any endowment policy is linked to the stock market, and will vary from year to year. There are risks involved in any investment that is linked to fluctuations in the financial markets in this way.
Many endowment policies that were taken out when interest rates were high (for example, between 10 per cent and 12 per cent) were issued on the assumption that it was reasonable to expect them to earn between seven per cent and nine per cent each year. However, as interest rates fall, there is an increased risk the policy will not earn as much as was predicted.
There is always a possibility that interest rates will rise again in future. In the long term your endowment policy could still earn enough to repay your mortgage. However, no one can reliably predict what will happen in future and if you are not happy with the risks involved, you should get advice.
