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    • Rabbit in the headlights
    • By Rabbit in the headlights 24th May 17, 9:28 PM
    • 6Posts
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    Rabbit in the headlights
    Standard Life endowment
    • #1
    • 24th May 17, 9:28 PM
    Standard Life endowment 24th May 17 at 9:28 PM
    Hi everyone

    First time poster here, who'd appreciate any advice re: the following.

    I've had an endowment mortgage with Standard Life for the last 20 years, with 5 years left on it.

    I freely admit I don't understand and never have understood my mortgage, which is probably one of the reasons I'm in this mess. Hopefully the jargon in the details below will make sense to someone:

    Unit linked endowment

    Current Benefit: £36554.00, the minimum amount payable on death or critical illness

    Expiry date: July 2022 (mortgage expiry date, that is, hopefully not my own expiry date )

    I currently pay £72.31 monthly.

    The current value is £16643.97.

    Obviously, the total value doesn't allow for any final bonus, profits unit price reduction or early exit penalty.

    The maturity value assuming low rate of growth: £30700.00

    Assuming mid rate of growth: £35600.00

    Assuming high rate: £41100.00

    My situation is that the nature of my employment has changed since I started the mortgage, and I'm now self-employed. I'm not earning a great salary, certainly much less than I did previously, but maybe I could stretch to paying about £400 a month to try and pay off the endowment by the target date in 5 years' time, though it'd be extremely tight.

    Ideally, I'd like to pay everything off in 5 years' time and then sell the flat or lease it out to try to get some value from it.

    Bearing that in mind, what would be my best option? Pay the extra wad every month for the next 5 years when it might not be enough anyway (per the potential low rate maturity value), sell it before then, or is there another, wiser course of action?

    Thanks for reading and I would be really grateful for any clear, constructive advice in simple terms. I'm not good with mortgage jargon, sorry!
Page 1
    • dunstonh
    • By dunstonh 24th May 17, 10:26 PM
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    dunstonh
    • #2
    • 24th May 17, 10:26 PM
    • #2
    • 24th May 17, 10:26 PM
    Obviously, the total value doesn't allow for any final bonus, profits unit price reduction or early exit penalty.
    There is no final bonus or profits or price reduction as it is unit linked. The surrender value would include any exit costs.

    Assuming mid rate of growth: £35600.00
    That is likely to be the most realistic. They have been doing better than that but its the closest to what is likely. However, as future is unknown, it could be either side of that.

    sell it before then
    You cant sell unit linked plans. They have a daily value. No-one is going to pay you more for units they can buy at the same price if they wanted.

    Bearing that in mind, what would be my best option?
    That is drifting too close to regulated advice to be answered.

    Does your endowment have a mortgage endowment promise?
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Rabbit in the headlights
    • By Rabbit in the headlights 25th May 17, 12:10 AM
    • 6 Posts
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    Rabbit in the headlights
    • #3
    • 25th May 17, 12:10 AM
    • #3
    • 25th May 17, 12:10 AM
    Thank you for replying.

    I don't know if it has a mortgage endowment promise or not. It isn't mentioned in the document where I got the other details from in my initial post. I'll try to find out.
    • TrickyDicky101
    • By TrickyDicky101 25th May 17, 7:57 AM
    • 2,784 Posts
    • 1,805 Thanks
    TrickyDicky101
    • #4
    • 25th May 17, 7:57 AM
    • #4
    • 25th May 17, 7:57 AM
    Unit linked endowment

    Current Benefit: £36554.00, the minimum amount payable on death or critical illness

    Expiry date: July 2022 (mortgage expiry date, that is, hopefully not my own expiry date )

    I currently pay £72.31 monthly.

    The current value is £16643.97.

    Obviously, the total value doesn't allow for any final bonus, profits unit price reduction or early exit penalty.

    The maturity value assuming low rate of growth: £30700.00

    Assuming mid rate of growth: £35600.00

    Assuming high rate: £41100.00
    Originally posted by Rabbit in the headlights
    Are you sure about these quoted numbers you have provided? The outcome figures look very high to me for your starting current value of £16.6k (compound annualised growth rate of the lowest outcome figure of £30,700 is 8.18% pa rising to 14.90% for the highest outcome) - and that's assuming your entire premium each month is invested without deduction of life insurance costs.
    • Rabbit in the headlights
    • By Rabbit in the headlights 25th May 17, 10:14 AM
    • 6 Posts
    • 1 Thanks
    Rabbit in the headlights
    • #5
    • 25th May 17, 10:14 AM
    • #5
    • 25th May 17, 10:14 AM
    Are you sure about these quoted numbers you have provided? The outcome figures look very high to me for your starting current value of £16.6k (compound annualised growth rate of the lowest outcome figure of £30,700 is 8.18% pa rising to 14.90% for the highest outcome) - and that's assuming your entire premium each month is invested without deduction of life insurance costs.
    Originally posted by TrickyDicky101
    Yes, I am. I've quoted them verbatim from the Quotation of Illustrative Values and have double-checked following your reply.
    • dunstonh
    • By dunstonh 25th May 17, 11:56 AM
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    dunstonh
    • #6
    • 25th May 17, 11:56 AM
    • #6
    • 25th May 17, 11:56 AM
    There was a rule change last year where projections had to include any guarantees of added benefits in them (previously these were excluded and would often significantly understate the likely outcome). Now, I thought it only had to do with pensions as that is more or less the only product left nowadays that has that sort of thing. However, it "could" be applied to endowments with MEPs. Std Life do operate an MEP. So, just theorising that it is possible that the projection includes an MEP.

    edit: PS16/12:
    Projections including guarantees
    • Require firms to show contractually obliged future values in projections, including guaranteed annuity rates (GARs).

    Now that document focus was on pensions but the life and pensions projections use the same principles and methods. So, it could apply. One way to check is to look at a past statement from 2016 or 17 (before this rule change). If there is a sudden jump up, then it could be down to that. Std Life could confirm but its unlikely their frontline staff would know the answer.
    Last edited by dunstonh; 25-05-2017 at 4:36 PM.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • fewcloudy
    • By fewcloudy 25th May 17, 3:13 PM
    • 168 Posts
    • 80 Thanks
    fewcloudy
    • #7
    • 25th May 17, 3:13 PM
    • #7
    • 25th May 17, 3:13 PM
    There was a rule change last year where projections had to include any guarantees of added benefits in them (previously these were excluded and would often significantly understate the likely outcome). Now, I thought it only had to do with pensions as that is more or less the only product left nowadays that has that sort of thing. However, it "could" be applied to endowments with MEPs. Std Life do operate an MEP. So, just theorising that it is possible that the projection includes an MEP.

    edit: PS16/12:
    Projections including guarantees
    • Require firms to show contractually obliged future values in projections, including guaranteed annuity rates (GARs).

    Now that document focus was on pensions and but the life and pensions projections use the same principles and methods. So, it could apply. One way to check is to look at a past statement from 2016 or 17 (before this rule change). If there is a sudden jump up, then it could be down to that. Std Life could confirm but its unlikely their frontline staff would know the answer.
    Originally posted by dunstonh
    Interesting. I too received an endowment statement from Standard Life this month, and was pleasantly surprised by potential pay-out at medium growth. In its final year of 25 now I might add.
    However, I am sure there was still some blurb on the statement, explaining that there was an MEP and that it might produce X at best guess, but could be more, could be less, could be nil. Not to count on it basically. So I therefore assumed that it was NOT included in the projected amount.


    fc
    Last edited by fewcloudy; 26-05-2017 at 10:36 AM. Reason: incorrect use of an apostrophe!
    Feb 2008, 20year tracker with Sprogget and Sylvester, 0.5% + base for 2 years, then 0.99% + base for life of mortgage. Kudos to my mortgage broker...
    • Rabbit in the headlights
    • By Rabbit in the headlights 25th May 17, 3:30 PM
    • 6 Posts
    • 1 Thanks
    Rabbit in the headlights
    • #8
    • 25th May 17, 3:30 PM
    • #8
    • 25th May 17, 3:30 PM
    I spoke to Standard Life today.

    They advised that the figure of £16, 643.97 I was quoted 2 months ago didn't include the final £8,000 + bonus. The current surrender value of the policy is therefore £25,086.67.

    I don't know if I explained myself very well in my first post; possibly not, but when I said I had a mortgage with Standard Life, I meant I have a Homeplan policy to pay off the mortgage at the end. The mortgage itself is with Nationwide.

    Standard Life confirmed that the policy I have with them cannot be altered in anyway; I can't change the payment amounts or pay any extra amounts; that's something I need to discuss with Nationwide, whom I've just emailed with my query re: how to ensure I meet the required amount at the end of the term.

    I guess any shortfall at the end of the term can be paid for from another source, whether I pay for it from an ISA, savings account, etc. If so, I'll look at putting an extra amount by every month to help pay off the mortgage in 5 years' time when it's due to end.

    Thank you all for your help.
    • TrickyDicky101
    • By TrickyDicky101 25th May 17, 3:48 PM
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    TrickyDicky101
    • #9
    • 25th May 17, 3:48 PM
    • #9
    • 25th May 17, 3:48 PM
    Do you hold UWP units (ie Unitised With Profits)? That would have a final bonus entitlement whereas a strict Unit-Linked policy would not.

    Anyway, a current surrender value of £25k do make the projections seem a whole lot more realistic.

    Good luck with paying your mortgage off
    • Rabbit in the headlights
    • By Rabbit in the headlights 25th May 17, 7:48 PM
    • 6 Posts
    • 1 Thanks
    Rabbit in the headlights
    Do you hold UWP units (ie Unitised With Profits)? That would have a final bonus entitlement whereas a strict Unit-Linked policy would not.

    Anyway, a current surrender value of £25k do make the projections seem a whole lot more realistic.

    Good luck with paying your mortgage off
    Originally posted by TrickyDicky101
    It's Unit linked.

    Time for me to start saving a lot extra every month to hopefully pay it off in 5 years' time!

    And thank you
    • dunstonh
    • By dunstonh 25th May 17, 8:24 PM
    • 89,513 Posts
    • 55,951 Thanks
    dunstonh
    It's Unit linked.
    in which case there will not be a bonus as that only applies to with profits (or unitised with profits)
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Thrugelmir
    • By Thrugelmir 25th May 17, 9:27 PM
    • 55,815 Posts
    • 49,184 Thanks
    Thrugelmir
    For peace of mind you could always consider making over payments on the mortgage.
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
    • Rabbit in the headlights
    • By Rabbit in the headlights 25th May 17, 9:52 PM
    • 6 Posts
    • 1 Thanks
    Rabbit in the headlights
    in which case there will not be a bonus as that only applies to with profits (or unitised with profits)
    Originally posted by dunstonh
    Okay, I don't know why the Standard Life staff member quoted me the amount that included an end bonus? All very confusing.
    • sandsy
    • By sandsy 16th Jun 17, 5:42 PM
    • 1,215 Posts
    • 712 Thanks
    sandsy
    Okay, I don't know why the Standard Life staff member quoted me the amount that included an end bonus? All very confusing.
    Originally posted by Rabbit in the headlights
    It sounds like it's unit linked but invested in the with profits fund - otherwise known as unitised with profits.
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