Should I surrender L&G endowment now

explorer2190 · 27 July 2008 at 1:16AM

Please can someone help? Do I KEEP OR SURRENDER ???????

I have had a 25year endowment policy with Legal and General which is due to mature in May 2009. I have kept an eye on its performance after the endowment crisis (See table on the left) in case I needed to sell.
I have paid off my mortgage so the full value will be payable to me.

I range L&G this week and found the surrender value had reduced by £398. I queried this and was told that a review had been made by actuaries, of all policies due to the current crisis with a cross the board reduction of between 2%-3% (I am not sure what this means). No change in the final bonus rate has been made? (I am not sure how this can be true.

I am concerned that the value of the policy will reduce due to the current recession which is expected to last several years. Whether it is by the final bonus being reduced or poor performance. I am trying to weigh up the risk of waiting for the policy to mature against surrendering now. Unfortunately I am not sure how to accurately work this out and hope someone may be able to help? Having looked at previous posts I hope I have provided enough details.

Premium £46.47pm.
Last statement December 2007 shows
Basic Sum assured £11,997.00
Existing Bonuses £!4,456.10
2007 annual bonus applied to basic sum assured 1.25%
2007 annual bonus rate applied to existing bonuses 1.25%
Total annual bonus added for 2007 £330.70
Total of basic sum assured and annual bonuses to 31.12.2007.
Current final bonus rate 82%
2006 final bonus rate 69%
2005 final bonus rate 57%
2004 final bonus rate 43%
2003 final bonus rate 38%
2002 final bonus rate26%
2001 final bonus rate 52%
2000 final bonus rate 72%
My last two projection letters show illustrated growth value
Feb 2007 4% £36400 6% £38500 8% £40,500
July 2008 4% £37.800 6% £38300 8% £38,800
Below is the record of my monthly checks on surrender value
Date S Value Change
14.12.04 £22594
19.1.04 £22725 £131
18.2.04 £22855 £125
1.3.04 £23654 £799
14.4.4 £23905 £251
14.7.4 £24298 £394
27.8.4 £23899 £597
17.9.4 £24004. £103
11.10.4 £24004 £0
10.11.4 £24108 £104
1.12.4. £24712 £604
6.1.05 £24819. £107
24.3.5 £25884 £1065
27.4.05 £25994 £100
20.6.05 £26222 £228
26.7.05 £26863 £441
30.8.05 £26980 £117
11.10.05 £27097 £117
8.12.05 £27330 £233
1.2.06 £27564 £234
1.3.06 £31221 £3657
24.3.06 £31303 £82
25.04.06. £31386 £83
25.5.06 £31449 £63
30.6.06 £31512. £63
27.7.06 £32184. £572
22.8.06 £32288. £104
25.9.06 £33448 £170
23.10.06 £33556 £108
22.11.06 £33664 £108
27.12.06 £33772 £108
01.01.07 £33880 £108
27.02.07 £34015 £125
28.3.07 £34121 £106
26.4.07 £34226 £105
22.5.07 £34337 £111
5.6.07 £34447 £110
27.7.07 £34557 £110
21.9.07 £34667 £110
27.9.07 £34777 £110
29.11.07£34887 £110
27.12.07£35108 £211
22.1.08 £35218 £110
22.2.08 £36790 £1572
31.3.08 £36911 £121
20.4.08 £37032 £121
02.6.08 £37157 £125
9.7.08 £37283 £126
24.7.08 £36885 -£398

Thanks for any advice :eek: :eek: :eek:

wymondham · 27 July 2008 at 8:56AM

I am by no means an expert on this, but as it matures next year the usual concensus is to let it run. However, as it's gone down in value maybe this is not so clear. I would be interested to see what the knowledgable chaps/chappets recommend on this one as I'm sure lots of people will notice this sort of scenario on their own policies at this downturn....

Rabiddog_2 · 27 July 2008 at 10:26AM

01.03.06 was a right good un?
As it its only got a year to go , yes let it run.. that way you get the full final bonus.
Thank god you're not obsessed with this.

Dick_here · 27 July 2008 at 11:04AM

Tell you what, if it goes down further we'll hold a whipround for you.

turbobob · 27 July 2008 at 11:56AM

It all depends on what you think will happen with the final bonus at the next declaration. The projections at 4, 6 & 8% this close to maturity are pretty much irrelevant IMO.

By my workings, if bonus rates stay the same as they are now, the maturity value would be around £38,908.90

That is:

Basic Sum Assured = £11,997
+ Accrued bonuses = £14,456.10
+ Future annual bonuses (on BSA+existing bonus @ 1.25%) = £330.66
+ Terminal Bonus @ 82% of previous bonuses = £12,125.14
Total = £38,908.90

However, if the final bonus rate drops to 70%, the MV would drop to around £37,134. If the rate dropped to 50%, the MV would drop to around £34,177.

I can't guarantee my workings are right, but believe them to be a reasonable approximation...

Who knows what will happen to final bonus rates over the next year. If the stockmarkets etc continue in the way of the last month or so then I feel it is pretty likely they will go down.

EdInvestor · 27 July 2008 at 3:09PM

You may find this thread useful

http://forums.moneysavingexpert.com/showthread.html?t=467296

The problem is that basically all relevant markets are down by quite large factors over the past year/18 months (equities, property and bonds).There is a "delayed action" effect with WP (aka "smoothing) so you are only just starting to see the effect of this on your policy value.

Almost certainly there will be more cuts to come.

What is the surrender value?

explorer2190 · 27 July 2008 at 11:26PM

Thanks everybody for all your responses to my question. It appears more threads are starting on this forum as people are starting to find out the reductions in surrender value of their policies.

I get a statement in December of each year which shows all the bonuses and final bonus rate percent. I am not sure I will wait that long as another thread showed a recent 20% reduction in final bonus.

I think I will contact L&G for more info and watch this board for further info. The original endowment was taken out to pay £32600, so it is one of the lucky ones to exceed its target.

I think my main objective is not to be greedy.

Thanks everyone again for your advice and would welcome any more help. Is there someone in L&G or working in the endowment market who can update us with what is anticipated in this area.

Thanks edinvestor. The current surrender value is shown in red on the monthly checks table shown in my post

:T :T :T :T

EdInvestor · 27 July 2008 at 11:46PM

If you cashed it in and put it in a high interest account @ 5% net also paying in the premiums to maturity, you should end up with c. 39k with no risk

That's much the same as the best turnout if you stayed.

Why take the risk that the turnout is sub-optimal?

explorer2190 · 29 July 2008 at 8:01PM

Thanks again EdInvestor.
I contacted L&G again and as much as they tried to reassure me of past performance, they stressed that the final bonus is not guaranteed. They also could not indicate how the final rate is calculated.

I agree with you EdInvestor that the best course of action is to sell now. I had made that decision this evening and just checked this board for any more entries. Thank you for reinforcing my decision.

This forum is a great resource. Thank you all :T :T :T :T :T :T :T :T :beer:

martin1018 · 29 July 2008 at 9:46PM

I had a similar thread just 3 weeks ago. I made enquiries of L & G to ascertain my surrender value on a policy that matures on 1st October. At that time I decided to keep the policy going and hope for the best.
In the light of this and similar threads I contacted L & G yesterday to find that my surrender value was already reduced by £216. As a result, and in the face of what I believe to be a worsening financial situation I decided to cut my losses and cash it in. So I now have £21,836.10 on its way to me in the next few days, but at least I'll sleep a lot easier!
Did I do the right thing? I still don't know, and I guess I never will.

explorer2190 · 31 July 2008 at 8:04PM

Hello Martin 1018

I took the plunge and surrendered yesterday for £36885. I confirmed there are no charges and all the money will be in my bank account in 10-15 days. Very efficient and quickly dealt with over the phone.
I am satisfied with my decision (Thanks everyone for your advice):T and wait to see how other endowments surrender values change over the next year. I intend to invest £3200 in a 1 year fixed rate ICICI bank account paying 7.2% and the remainder in other high paying accounts under the £35000 safety limit.

Thanks all again :T :T :T :T

Should I surrender L&G endowment now

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