Fear of Finance

There are two ways of choosing which endowment policy, single- premium bond or pension plan will suit you best. Past performance is a guide only to the past and by definition it is always too late for the new investor, while projections based on the expected level of charges provide only one of the two factors that determine actual future performance. They tell you nothing about future performance, which is arguably the more important of the two.

Using the past actual and projected future performances has allowed the magazine Money Marketing to produce the best assessment yet of winners and losers among the main providers of insurance-based investment products.

The latest review published today is still not a simple document. The best performers over five, 10, 15 and 25 years are not always consistently the same, and those which have the best values when held to maturity are not always the same as those with the best surrender or transfer values at intermediate stages in their life, something which assumes relative importance when you remember how relatively few policies are held from start to finish.

Out of 54 companies only 37 returned entries. Nine companies - CIS, Friends Provident, General Accident, Royal London, RNPFN, Scottish Widows, Standard Life, Sun Life of Canada and Wesleyan - produced average or better past performances over the whole range. The best overall ratings on endowment policies over the last 10 years came from Swiss Life, which turned a monthly premium of pounds 35 from a 30-year-old non-smoking male into pounds 8,351, followed by Royal London, RNPFN, Scottish Mutual and the Tunbridge Wells, and the least successful has been Eagle Star, which was worth only pounds 5,966 or 71 per cent of the best performer, with Britannia Life and Royal Insurance not much better. After nine years Sun Life of Canada had the highest surrender value.

Over 25 years RNPFN had turned pounds 20 a month from a similar male into pounds 45,789, ahead of Royal Insurance, Wesleyan, General Accident and Commercial Union, with Colonial in last place with pounds 30,260. There is good news among the findings, however, because the recent trend of falling endowment policy pay-outs seems to have been reversed over the longer term, especially when terminal bonuses are taken into account.

For future projections after deducting charges, Equitable Life is expected to work out cheapest over 10 years followed by Legal & General and Britannia Life, with NFU Mutual the worst performer, while over 25 years Equitable Life heads RNFN and Axa, with Royal Insurance and Scottish Life at the bottom of the pack.

On the pension front General Accident turned pounds 30 a month for a 50-year- old into pounds 31,565 after 15 years, and heads Axa, Scottish Widows, Equitable Life and Norwich Union, while the cheapest future provider will be Medical Sickness, turning a monthly premium of pounds 100 for a 30-year-old male into a fund of pounds 247,000 after 35 years, assuming a steady 9 per cent compound growth before charges and inflation of 4.5 per cent.

Equitable Life is in second place, followed by Scottish Equitable, RNPFN and Clerical Medical, while the Prudential could only manage pounds 183,000 just ahead of Axa Equity & Law.