The proportion expected to fall short has soared from 46 per cent to 60 per cent in just two years, dragging in an estimated 4.5million householders into the red. Endowment policies were heavily marketed by insurance salesmen back in the 1980s with promises that the policy payouts would repay their mortgage and probably leave a tidy surplus on top.

Endowment policies were supposed to work by investing part of each monthly payment into bonds and stocks. But as we all know now, stock market falls have created a black hole in insurance backed funds estimated at around 60 billion pounds. Holders of 12 million policies - some investors have more than one - are now facing an average shortfall of 10,000 pounds below even the original home loan, never mind the promised surplus!

This means that hopes of a retirement nest egg have been shattered and some elderly homeowners could even be forced to sell their homes in order to repay their mortgage. The insurance industry expects to send out over 3 million letters to investors warning that they may almost certainly need to find more money to repay their mortgage when the time comes.

Consumer groups described this situation as 'heartbreaking' and 'scandalous' and advised people who receive warning letters to immediately seek independent advice. Possible action includes partly or fully converting the existing mortgage into a repayment mortgage or taking out an additional savings plan but with interest rates so low, the repayment mortgage option is likely to be the most popular option.

The scale of the problem has been demonstrated by cuts in endowment valuations from two of Britain's largest insurance companies. A 25-year endowment from Friends Provident taken out by a 29 year old male paying 50 pounds a month should now have a maturity value of 77,096 pounds compared to 106,188 pounds only four years ago. On a similar Scottish Life policy the forecast payout has been cut by 10,479 pounds from 94,738 pounds last year to just 84,259 now. And Standard Life has admitted that 800,000 policy holders, that's half its total, could be in trouble.

The Consumers' Association and MPs believe that the insurance industry should do far more to protect customers by taking cash out of 'orphan assets' to boost endowment policies. These orphan assets were largely built accumulated in boom years, when customers' money was making good returns.

Millions of endowment mortgages were sold on rosy promises by commission hungry salesmen with forecasts based on a booming stock market. And by 1988, 84 per cent of all home loans were backed by endowment policies. But how things have changed! As the unfolding scandal has emerged, negative publicity has largely forced most insurance companies to abandon them. Endowment mortgages now account for less than ten per cent of new mortgages.

Unsupportable promises have led to many leading insurers being fined millions of pounds by city watchdogs and ordered to pay compensation to thousands of policyholders who were duped into buying the policies on false promises.

Indeed, the Financial Services Authority has issued leaflets advising policy holders how to complain about endowment sales.