I have a projected shortfall. What are my options?

You can make up a shortfall in a number of different ways. You'll find these explained in detail in the online Money Advice Service guide - just click on this link: www.moneyadviceservice.org.uk/en/articles/dealing-with-an-endowment-shortfall.


What do the red, amber and green ratings mean?

If you're using an endowment plan to pay off your mortgage, you'll have received a letter in November telling you whether your plan is on track to repay your mortgage. These letters have a colour-coded rating:

  • Red means there's a high risk that your plan won't pay out enough to cover your target amount, and needs to grow by more than 7.5% (after tax) each year
  • Amber means there's a significant risk that your plan won't pay enough to cover your target amount, and needs to grow by over 4.5% (after tax)  each year
  • Green means it's currently on track to repay your target amount as long as it grows by at least 4.5% (after tax)  each year

Low Cost Endowment mortgage plans invest in the Police Mutual Life Fund. This fund is invested in a mix of equities, bonds, property, commodities and cash, and these can vary in value. So it's a good idea to check your yearlyletter carefully each year, even if your plan has been on track so far. Please bear in mind that the projections we send you are no guarantee of what you'll receive when your plan matures - you may get back more or less than the amounts we quote.

If you've told us that you're no longer using your plan to pay off your mortgage, we won't send you a colour-coded rating - just a yearly statement.


My projection is green. Do I need to worry?

A green letter means your plan is currently on track to pay off your mortgage, but this may change in the future. A green letter is no guarantee that your plan will pay off your mortgage.

As pointed out above, green means that your target amount will be achieved if our investments grow at 4.5% (after tax) a year. But it's worth keeping in mind that there's no guarantee they'll do this.


Are the projection rates realistic?

Yes. Because the Low Cost Endowment is a long-term product, it gives you an indication of what it could be worth at the end of its term. These growth figures are 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 - 1.5%, 4.5% and 7.5%. Why is this?

The projected values we send you are made up of your plan's Guaranteed Value at the end of its term and a projected final bonus, assuming our investments grow at the three projection rates per year for the rest of this term. We work out projected final bonuses by comparing the Guaranteed Value at the end of the term to what the underlying value of a plan may be worth when it matures.

If a plan's Guaranteed Value is less than its underlying value, we aim to pay out the difference in the form of a final bonus. So for different growth rates, the projected final bonus and the projected values will be different.

If the underlying value of a plan is less than its Guaranteed Value, the minimum we will pay out is the Guaranteed Value. So for different growth rates, the projected final bonuses may be zero and so the projections may be the same (and equal to the Guaranteed Value). We've set out an example below:



If our investments grow at:

1.5% a year

4.5% a year

7.5% a year

  • Guaranteed Value




  • Underlying value




Outcome of comparing the Guaranteed Value to the underlying value

Guaranteed Value is higher than the underlying value, so the projected final bonus is zero

Guaranteed Value is higher than the underlying value, so the projected final bonus is zero

Guaranteed Value is lower than the underlying value (by 20%), so the projected final bonus is 20%

Projected final bonus




Projected value




Please bear in mind that your projections aren't guaranteed - they're just intended to give you an idea of what your plan might be worth assuming these different rates of growth. We won't know what your plan's final value will be until the end of its term, because we don't know what investment returns will be like in the meantime.

Should I surrender my plan early?

With-profits plans, like your Police Mutual Low Cost Endowment mortgage plan, are long-term contracts. This means they're designed to give the best returns when they mature, not if they're cashed in early. Cashing in before the end of the term may not be in your best interest.

If you do choose to surrender your plan early, we'll calculate its cash-in value at the time. The amount you receive will depend on the investment return and the amount you've paid in, taking into account our charges, expenses, tax, our smoothing policy and the cost of life cover.

We know that in certain situations it may be tempting to cash your plan in early, or stop making payments - particularly if money is tight. If this is the case we strongly recommend that you give our helpline a call on 0800 652 8979 or talk to your financial adviser, as you may end up losing out financially. We don't want that to happen. If you don't have a financial adviser, you can find details of advisers in your area at www.unbiased.co.uk.


Where do you invest my money?

The Police Mutual Life Fund invests in a range of assets including global equities, property, commodities, interest paying securities such as UK government bonds (Gilts) and corporate bonds, and cash. We constantly monitor performance of the Life Fund to make sure our investments give the highest level of security and best return.


Is Police Mutual financially sound?

Yes. Police Mutual is not immune to market conditions, but we are well positioned to safeguard your interests. Our diversified investment strategy aims to control risks by avoiding overexposure to specific markets. We've carefully considered the proportion of our Life Fund's assets invested in more volatile markets such as equities so as to balance higher expected long-term returns against the risk of a setback in the market and we're always alert to the possibility of another downturn in the markets. 


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

It's true that the aim of a with-profits fund is to smooth out some of the short-term highs and lows over the period of time that you hold the plan. So maturity payouts will be steadier year on year because we're able to use some of the investment growth made in years when the fund performs well to top up bonuses in years when economic conditions aren't so good. However, there may be times when smoothing can't fully protect your investment. This can happen following a significant or sustained fall in the stock market or when investment returns are below the level we normally expect. In these circumstances, your plan's value may suffer.


How is the Police Mutual Life Fund performing?

The investment return on our Life Fund is the single biggest thing that affects the returns you get on your savings. Our investment return before tax on the Life Fund was 8.1% in 2014. However, the markets in the second half of 2015 so far have been volatile. To 30 September 2015 the return before tax for the year was -1.8%.

The performance of the Life Fund in 2015 isn't taken into account when calculating the projected values on your yearly statement this year. The 2015 performance will be included in your projected values on next time's statement. This means your colour rating may change in your next statement.

But don't forget that past performance is no guarantee of future performance. 

Each quarter we provide updated information on the investment performance of our Life Fund. You can read this online at policemutual.co.uk/news/category/life-fund-updates.


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

Yes - if the purpose of your plan has changed, please let us know. This will allow us to tailor the information we send to you. We'll continue to send you a yearly statement, but stop sending you a colour-coded risk warning or Money Advice Service mortgage endowment leaflets.


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

Yes. Please let us know any assignment changes by phoning our Customer Relationship Centre on 0800 652 8979. Assignment means that when your plan becomes payable, we'll pay the plan proceeds direct to the assigned third party. So we need to make sure our records are up to date. On your yearly statement in the 'Who the plan covers' section you'll see the assignment details we currently have for you - if these have changed, please get a notice of reassignment from the new third party and send a copy to us so that we can update our records.


My mortgage plan is due to mature soon - why haven't I received a statement?

The Low Cost Endowment statements we've sent you don't include any plans that mature in the next six months. We'll write to you again with information on mortgage plans that are close to maturity 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; we send out statements for other types of plans (such as pensions, savings or investments) separately.

If you have other types of plan and would like information on them, please call our Customer Relationship Centre on 0800 652 8979 or 01543 305413 from a mobile.


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