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Endowment - Surrender or Keep ??
Somerset
Posts: 3,636 Forumite
My endowment misselling complaint was successful :j I now have the following choice to make :
- Surrender the endowment to L&G and accept £ 27,013 or
- Keep the endowment ( current surrender value £ 20 427 ) and accept chq for £ 6,585.
My instinct is to keep the endowment. I've read here that the projected returns 'can' be misleading, and I know equities are performing better now. I get the idea it all depends on the provider and the fund, and I don't have enough inside knowledge to assess my particular endowment. Details as follows :
It was taken out to repay a £ 60,000.00 mortgage 07/11/89. Monthly premium £ 73.10.
Company : Legal & General Maturity Date : 07/11/14
From Y/E 2004 Statement
Basic Sum Assured - £ 18,360.00
Total Existing Bonuses : £ 9,374.50
Total New 2004 Bonuses : £ 254.90
2004 annual bonus rates on : sum assured ( 0.75% ) on existing bonuses ( 1.25% )
Current terminal bonus rate : 47% ( FLUCTUATES - NOT GUARANTEED )
Current Surrender Value £ 20,228.10.
Last projected shortfall letter 23/08/04
4% amount £ 36,600 shortfall £ 23,400
6% amount £ 43,100 shortfall £ 16,900
8% amount £ 50,800 shortfall £ 9,200
L& G have said it's in a 'with profits' fund but no more detail than that.
I've been asked here before whether the surrender value includes the terminal bonus - L & G can't give an answer so I don't know. I also don't know whether I can switch funds ( if appropriate ) without penalty.
Actually I don't really know a lot about, what is for me, a sizeable investment. I would appreciate comments from anyone.
- Surrender the endowment to L&G and accept £ 27,013 or
- Keep the endowment ( current surrender value £ 20 427 ) and accept chq for £ 6,585.
My instinct is to keep the endowment. I've read here that the projected returns 'can' be misleading, and I know equities are performing better now. I get the idea it all depends on the provider and the fund, and I don't have enough inside knowledge to assess my particular endowment. Details as follows :
It was taken out to repay a £ 60,000.00 mortgage 07/11/89. Monthly premium £ 73.10.
Company : Legal & General Maturity Date : 07/11/14
From Y/E 2004 Statement
Basic Sum Assured - £ 18,360.00
Total Existing Bonuses : £ 9,374.50
Total New 2004 Bonuses : £ 254.90
2004 annual bonus rates on : sum assured ( 0.75% ) on existing bonuses ( 1.25% )
Current terminal bonus rate : 47% ( FLUCTUATES - NOT GUARANTEED )
Current Surrender Value £ 20,228.10.
Last projected shortfall letter 23/08/04
4% amount £ 36,600 shortfall £ 23,400
6% amount £ 43,100 shortfall £ 16,900
8% amount £ 50,800 shortfall £ 9,200
L& G have said it's in a 'with profits' fund but no more detail than that.
I've been asked here before whether the surrender value includes the terminal bonus - L & G can't give an answer so I don't know. I also don't know whether I can switch funds ( if appropriate ) without penalty.
Actually I don't really know a lot about, what is for me, a sizeable investment. I would appreciate comments from anyone.
0
Comments
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Hi Somerset
Looking just at the policy itself, if you took the surrender value and put it in the bank @4% also paying in the premiums until maturity you would get 36,201, somewhat higher than the guaranteed value (27,988) and about the same as the projected return at 4% growth (but this is not a guaranteed return) .I am comparing only risk free returns here, not the unguaranteed terminal bonus.
The first two companies to report in this year's bonus season are both cutting payouts - that's Friends Prov and Norwich Union, so TBs are still coming down rather than rising
You will of course get a higher return if your mortgage rate is higher and you use the money ( and also the compo) to reduce the capital owed. Let's say you are paying 5.5% on your mortgage.If you do this, also boosting your mortgage payment by the endowment premium, your comparable return goes up to 50,224, which is getting closer to the target.Trying to keep it simple...
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Instead of surrendering, look at selling. I did and got much more for the policy, if that's the route you choose to go down."When you want something said, ask a man.
When you want something DONE, ask a woman" - Margaret Thatcher0
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