Despite an 16 per cent rise in the £61 billion Prudential with profits fund, mortgage endowment policies values have fallen again. Their Scottish Amicable policies have also fallen.

The company reported that a 25 year, £50 per month policy maturing in May will pay out £35,834, a fall from £37,738 for a similar policy maturing a year ago. Similar policies with Scottish Amicable have fallen from £38,707 to £37,635.

Prudential explained how ‘smoothing’ had caused maturity payouts to fall despite a rise in fund value. Because payouts to policyholders were insulated from some of the effects of the 2008 downturn, the company had now retained some of the profits from 2009, rather than paying it to policyholders. “Our consistent approach to smoothing and bonus setting has served our policyholders well, protecting them from the full impact of volatile investment condition.” said chief actuary David Belsham.

The outlook for both Prudential and Scottish Amicable mortgage endowment customers may deteriorate further. During the past year 26 per cent of Prudential policies were in shortfall by an average of £1,100, affecting 3,823 policyholders. The situation was worse for Scottish Amicable policies where 50 per cent were in shortfall by an average of £850. This affected over 37,000 policyholders.

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