Should I sell my endowment

DavidRossitter · 4 March 2008 at 11:05AM

Hi

We have a 25 year endowment with Scottish provident for which there are 5 years left.

Sum assured - 22503
Total bonuses - 17378

Redemption value today 36703

Forecast value
based on 4% 49600
5.75 53700
7.5 58100

Premium £91/month

I have had one quote to buy the endowment out at 38171 and waiting for aap.

I have had a life assurance quote for the total cover for £11/month

So my thinking is if I sell the endowment and use the balance of the premium for the next 5 years at 5.3% (current mortgage rate) i estimate this will be worth 54600. Given Scottish provident are not paying any bonuses each year now and doing it all via terminal bonus it would seem that there is risk via this route, yet selling it and paying off the mortgage with what is there and paying the balance of the premium has much lower risk.

Do people agree - is it as clear cut as this?

Thanks David

EdInvestor · 4 March 2008 at 4:41PM

DavidRossitter wrote: »

So my thinking is if I sell the endowment and use the balance of the premium for the next 5 years at 5.3% (current mortgage rate) i estimate this will be worth 54600. Given Scottish provident are not paying any bonuses each year now and doing it all via terminal bonus it would seem that there is risk via this route, yet selling it and paying off the mortgage with what is there and paying the balance of the premium has much lower risk.

Do people agree - is it as clear cut as this?

That's correct. Formerly you took the risk and got a good premium for it - the endowment paid off the mortgage and gave you an extra cash lump sum.

Now you're still taking the risk, but not only isn't the endowment giving you any extra cash, it also often isn't paying off the mortgage.

You can make more money by not taking a risk.

There is absolutely no point in holding onto policies in this situation.

DavidRossitter · 8 March 2008 at 1:16PM

Interestingly my IFA who had nothing to do with this policy or would benefit if I sold it suggested I might leave it in place - as he believes Scottish Provident is one of the better endowment offices and that terminal bonuses have been getting better so it may pay off more than the forecast position.

Anyone have any thoughts on this?

Thanks

dunstonh · 8 March 2008 at 1:32PM

Hmm, he obviously has more confidence in Scot Prov than I do. I wonder if he was thinking Scot Amicable when he told you that?

He could well end being right. Most insurance companies are putting the bulk of the returns on to the terminal bonus for solvency reasons. The problem with this is that you are largely waiting until maturity to find out if you hit target or not with some of these. With a Norwich Union or Pru or even Standard Life to a point you wouldnt be that concerned as they have a good potential and a good track record. With Scot Prov, I would really be looking at the costings of this and the alternatives and see what the risks vs rewards of all options and see which is logical. Sometimes its too close to call. Sometimes the decision is obvious. My gut would say Scot Prov isnt that good but I would still rely on evidence before making that decision.

DavidRossitter · 1 November 2008 at 10:41AM

Hi

Further to my earliest posts I am now of the firm opinion to cash this in/sell it. My latest cash in value is £38.5k and on any "sensible" projections over the next few years (we have 4 to go) given returns are going to get squeezed we might as well pay off this bit of the mortgage and save the premiums and take life assurance out separately.

AAP (whilst they did in March) are no longer interested in buying it. I am trying the other leader. That seems to tell me something!

So in the cashin documentation from SP it says that I can be taxed on this based on the gain. So I am assuming that I take the cashin value minus the premiums and split this in two (its a joint policy) and providing each contribution doesnt take us over the 40% limit we have no more tax to pay. Is that correct?

Finally I feel the need to move quick as I am suspicious that they will put on an early exit penalty if people do like me. I am sure there terms can allow us to do this but 20-20 hindset shows that these policies are so heavily loaded towards the selling company that should never have touched endowments ever - you live and learn!

Any other pitfalls re cashing in the endowment?

Thanks David

Should I sell my endowment

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