Statements for Low Cost Endowments are sent to policyholders in November. We understand you may have questions relating to your Low Cost Endowment. If these FAQs do not answer your question please phone our Customer Relationship Centre on 0845 88 22 999.

I have a projected shortfall, what should I do next/what are my options?

There are different ways you can try to make up a shortfall. These are explained in detail in the Money Advice Service guide. Click here to access it online.

Should I surrender?

With-profits plans are long term contracts and are designed to provide the best returns at maturity rather than if they are cashed in early. Cashing in before the end of the term may not be in your best interest.

If you surrender your plan we will calculate the cash-in value at the time. The amount you receive will depend on the investment return, the amount you have paid in, our expenses, the cost of life cover and the results from other business areas where the Life Fund shares the risks and rewards.

Where can I get advice?

If you don't have a financial adviser, you can find details of independent financial advisers in your area at www.unbiased.co.uk

What is meant by the red, amber and green ratings?

If you are using an endowment policy to pay off your mortgage, you should have received a letter in November telling you whether your policy is on track to repay your mortgage. These letters have a colour coded rating and will be marked:

• 'red' if there is a high risk the policy won't pay out enough to cover the target amount and requires growth in excess of 7.25% each year
• 'amber' if there is a significant risk the policy won't pay enough to cover the target amount and requires growth in excess of 5.25% each year
• 'green' if it is currently on track to repay the target amount if growth of 5.25% each year is achieved

Low Cost Endowment policies are invested in the Life Fund which invests in a range of assets such as bonds, cash and equities, which can vary in value. Therefore make sure you check each annual letter, even if the policy has so far been on track. Projections are no guarantee of what you will receive at the maturity date; you may get back more or less than the projected values.

If you have previously advised us that a plan is no longer being used for mortgage purposes, you won't get a colour coded rating, but you will receive a yearly statement.

My projection is green. Do I need to worry?

A green letter is no guarantee that your plan will pay off your mortgage.
Green means the target amount will be achieved if our investments grow at 5.25% (after tax) a year. There is no guarantee that a growth rate of 5.25% each year will be achieved in the future.

Why have the projection rates changed?

We have taken the decision to increase the projection rates that we use to project how much your plan may be worth when it matures from 3%, 5% and 7% to 3.25%, 5.25% and 7.25%. This is because we want to try and be as realistic as possible so that you can plan effectively for the future. These rates reflect our most up to date estimates of future performance and are part of the reason your new projected figures will be higher than last year.

In this climate, are the projection rates realistic?

Yes, as the Low Cost Endowment is a long term product it still gives an indication of what it could be worth at the end of the term.  These growth figures are deemed to be appropriate growth rates to use for this kind of product.

My plan's projected values are the same even though the projection rates are different at 3.25%, 5.25% and 7.25%. Why is this?

This can happen when your plan's underlying value is worth less than its guaranteed minimum maturity value. Projected values are made up of the guaranteed minimum value at maturity and a projected final bonus. We work out your plan's projected final bonus by comparing what the underlying value of the plan may be worth at maturity to the guaranteed minimum value at maturity. If the guaranteed minimum value is less than the underlying value of a plan we aim to pay out the difference in the form of a final bonus. If your plan has a projected final bonus it will vary according to the different growth rates and so the projected values will be different. If the underlying value is less than the guaranteed minimum value the projected final bonus will be zero and the projections will be the same.

An example

It is important to remember that the final value of the plan will not be known until the end of the term as we don't know what investment returns will be in the meantime. Projections are only intended to give you an idea of what the plan might be worth assuming different rates of growth - they are not guaranteed. The guaranteed minimum value may increase over the term.

Where is my money invested?

The PMAS Life Fund invests in a range of assets including UK and overseas equities, property, commodities and fixed-interest securities such as UK government bonds (Gilts) and corporate bonds. We constantly monitor performance of the Life Fund to ensure that investments are correctly placed to help maximise security and return.

Does Police Mutual remain financially sound?

Yes. Turbulence in the global financial markets and the resulting impact on world economies and consumer confidence mean we have witnessed and experienced unprecedented times. Police Mutual is not immune to market conditions, but we are well positioned to safeguard the interests of our members. Police Mutual has a diversified investment strategy aimed at controlling risks by avoiding overexposure to specific markets. The proportion of the Life Fund's assets invested in more volatile markets such as equities is carefully considered so as to balance the higher expected long-term returns against the risk of a setback in the market. We remain vigilant to the possibility of renewed economic and market uncertainty and continue to have a strategy in place to reduce our investment risk as appropriate. 

What happened to the money made in good investment years? Surely the with-profits smoothing effect should cope with market falls?

Police Mutual has continued to smooth payouts in 2011, cushioning the immediate impact of sharp market falls for our members. However, smoothing cannot fully protect against the significant and sustained Stock Market falls that have been experienced in recent years.

Do you need to know if I'm no longer planning to use my policy to pay off a mortgage?

Yes, please tell us if your purpose for your plan has changed. This will enable us to tailor the information we send to you. We will continue to send you a yearly statement, but will no longer send you a colour coded risk warning and Money Advice Service mortgage endowment leaflets.

Do you need to know if my plan is assigned to a mortgage lender?

Yes, please inform us of any assignment changes by phoning our Customer Relationship Centre on 0845 88 22 999. Assignment means that when the policy becomes payable we will pay the plan proceeds direct to the assigned third party so we need to ensure we keep our records up to date. Please provide written proof of the assignment or contact us on 0845 88 22 999. On your yearly statement in the 'Who the plan covers' section we have stated the assignment details that are currently on your policy records - please let us know if your plan is no longer assigned to the third party shown on your statement; if it has changed you will need to obtain a notice of re-assignment from the third party and send a copy to us so that we can update our records.

Why haven't I received a statement for my mortgage plan that is due to mature soon?

The Low Cost Endowment statements that we have sent you will exclude any plans that mature in the next six months. Information on mortgage plans that are close to maturity will be sent to policyholders in a separate mailing before the maturity date.

Why haven't I received a statement for my other plans?

The Low Cost Endowment statement mailing covers mortgage related plans; statements for other types of plans, such as pensions, savings or investments, are sent out separately.

If you have other types of plan and would like information on them please call our Customer Relationship Centre on 0845 88 22 999.