IPTC (The Insurance Policy Trading Company) claims there is a vast difference between the performance of unit-linked and with-profits endowments.
There has been much recent hype about the poor performance of endowments, falling surrender values and maturity shortfalls. IPTC says this is relative to the type of endowment, and relative to the performance of investments in general, in the current financial climate.
The company acknowledges that it has been a shock to see somany bonus cuts on with-profits endowments but says that their performance compares well to that of unit-linked endowments.
IPTC's valuations department quotes an Allied Dunbar unit-linked endowment which started 1/7/93, maturity 1/7/2018. A total of £8317.93 has been paid in premiums and the surrender value at 5/8/02 was £3523.58. In comparison is a Friends Provident conventional with-profits endowment. The start and maturity dates are the same. Total premiums paid to date are £6762.36 and the surrender value at 10/8/02 was £6190.04.
The unit-linked endowment will always fluctuate in value, in line with stock market performance. The with-profits endowment will grow in value with each successive bonus year. IPTC adds that, at nine years old, the product has not yet started to build up the “meat” created by the bonus structure which is designed to create a sharp rise in the latter years of the term.