86% of endowments face shortfall

Some 86 per cent of mortgage endowment polices look set to face a shortfall.

Research by fairinvestment.co.uk reveals the high levels of endowment policy holders now receiving warnings that their policy will not be enough to pay off the mortgage.

Some 41 per cent of policy holders are expecting an endowment policy deficit of up to 25 per cent, while 23 per cent forecast a 50 per cent deficit.

Only six per cent expect an endowment surplus.

Sharon Bratley, chartered financial planner at Fairinvestment.co.uk, said: "Our statistics just go to show what a let down endowment policies were and still are.

"Those who have not yet done anything and are expecting a shortfall on their policy should act now. There are a number of options open to investors, one of these being to sell the policy. For those sitting on their endowment it might not be too late to sell; there are still plenty of investors out there who see endowments as a desirable asset."

She added: "Alternatively, if you feel the risks associated with your endowment policy were not explained sufficiently at the time, you could have grounds for complaint and be eligible to file for compensation."

The Financial Services Authority (FSA) estimates some 700,000 people have not taken action to deal with endowment shortfalls, since the issue was first raised.

In 2003, the government accurately estimated eight in ten endowment policies sold were unlikely to pay off the mortgages they were taken out for.

Since then 70 per cent of those facing endowment shortfall have remortgaged, sought financial advice or applied for compensation.