Endowment providers' boycott of performance rating

A record number of endowment providers have refused to participate in the UK's most comprehensive survey on the sector's performance, prompting criticism that the industry is trying to hide dismal returns from customers.

A record number of endowment providers have refused to participate in the UK's most comprehensive survey on the sector's performance, prompting criticism that the industry is trying to hide dismal returns from customers.

Eagle Star, Allied Dunbar and NPI were among 18 of the UK's 54 endowment providers who refused to participate in the annual survey by the financial trade magazine Money Marketing, which ranks returns from with-profits and unit-linked endowment funds.

Experts who compiled the survey suspect that the gap between the best and worst performers could be as wide as 50 per cent, despite customers paying the same level of premiums.

John Jenkins, an actuary at KPMG, said: "You have to wonder why some providers refused to give information. The lowest figure provided (in the survey) for 25-year policies is £33,322 on £20 premiums. But I suspect the lowest in the market could be as little as £25,000." By comparison, investing £20 a month in the top ranked Scottish Widows over 25 years could yield £56,823.

Teresa Fritz, principal researcher for the Consumers' Association, said: "Given the record of endowment providers it is a very poor show that they have not participated in the survey. It is practically impossible for customers to compare policies and there will be a lot of people who are worried."

The refusal to give information for the survey comes at a time of sharply falling confidence among the general public in endowment policies.

Sales of new policies have fallen dramatically while a number of branded financial services companies have stopped selling endowment policies altogether in the face of mounting criticism in the industry about their value as a vehicle for repaying interest-only mortgages.

It is widely accepted in the industry that up to three million policyholders could have difficulty repaying their mortgages because the endowment policies they have bought will not deliver the anticipated returns.

Endowment providers have escaped charges of mis-selling after the industry regulator, the Financial Services Authority, ruled that policies are mainly falling short due to macro-economic conditions of low inflation and low interest rates rather than deliberate deception by companies. But it warned the industry yesterday: "We cannot force companies to take part in a commercial survey. But next year we will be publishing comparative tables on endowments and other products. If companies refuse to give us information we can - and will - invoke the law."

NPI yesterday said: "We do not claim to be among the best in the market. But when the bottom providers all pull out and you find yourself at the bottom, that is unfair." But NPI did say that it will have to send FSA-endorsed letters to only 20 of its 2,700 endowment mortgage customers warning them that their policy may not pay off their endowment mortgage.

Eagle Star and Allied Dunbar, which together have nearly half a million endowment policyholders, did not participate in the survey and did not provide any information yesterday. Eagle Star said: "We no longer sell endowments so, to avoid confusion about whether the product is available, we have not given information. However, if a customer wants to find out how their policy is doing they can contact us." Both companies refused to say how many policyholders would receive warning letters.