I have a projected shortfall. What are my
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.
What do the red, amber and green ratings
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
- 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 yearly letter 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
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
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.
Why have the three projection rates changed from 3.1%,
4.65% and 6.3% to 1.5%, 4.5% and 7.5% since my last
Projection rates have changed since last year's statements to bring
them into line with the rates specified by the financial regulator,
the Financial Conduct Authority. The projection rates used are
standard projection rates.
My plan's projected values are the same even though the
projection rates are different - 1.5%, 4.5% and 7.5%. Why is
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
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
Outcome of comparing the Guaranteed Value to the underlying
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
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
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
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
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
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
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 9.3% in 2013. So
far in 2014 to 24 July the return before tax was 5.1% (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
Do you need to know if my plan is assigned to a mortgage
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
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