Clerical Medical Endowment policies

welnik

I had the misfortune of taking out a low cost with profits Clercial Medical endowment policy in 1989. I have been paying in £600 a year for the last 15 years and up until the last 2 or 3 years, received reversionary bonuses of between £300-£400 per year. Last years bonus was less than £200. This is supposed to be clearing my mortgage of £37,500 in 10 years time. I have ready somewhere that they are likely to be half of that in future years.

I also have a prudential life policy which costs £12.00 per month and provides £60,000 of cover on death.

Now what I find astonishing is this. They are taking £600 of my money each year and adding less than £200 onto my policy in bonuses? I can appreciate that with the endowment there is also an element of life cover, but if I am paying £12.00 for £60,000 of cover, I wouldnt have thought that the life cover for both of us bearing in mind we were early 20's when we took it out, would be any more than £10.00 per month.

I really feel like cashing it in as I could definately make £600 make a profit in 12 months by just putting it into an investment account. If I dont cash it in and just freeze my payments per month, what is likely to happen?

dunstonh

Now what I find astonishing is this. They are taking £600 of my money each year and adding less than £200 onto my policy in bonuses

It doesn't work that way with old convential with profits endowments, which i assume is what you have.

So, assuming this is a convential with profits plan they have a guaranteed sum assured to which bonuses are added to.   This is often around 24%-33% of the target value.   You had that from day 1 so the bonuses are not going to compare to the premiums you pay.  You need to include the guaranteed sum assured.

welnik

Thanks for your reply.

I was 20 when I took out my mortgage and took endowment on the advice of my boss who was a financial adviser. The way he sold it to me was that I would end up with a massive sum at the end guaranteed. Interest rates were 15.5% then so it seemed realistic. I knew that he would make commission out of the sale so I went direct to Clerical Medical. Big mistake, now I cannot make a claim for miss-selling. I have been unlucky financially ever since.

My house dropped by 35% within 6 months of moving in. It was 1998 before it achieved the value we actually paid for it. Now we have some equity, we still cannot move house as the areas we want to move to are well out of our price range. Obviously having an endowment mortgage the balance doesn't decrease.

My hubby was sold a second pension by a broker when he thought he was just increasing the premium on his first pension. So two lots of charges.

I joined my company the month after they ditched the final salary pension scheme.

I even withdrew all my savings from Halifax just before they announced they would be paying windfalls to account holders.

So Ive not had much luck really.

This is why I get really wound up when I get those statements through telling me what my endowment is worth and that its not going to pay my mortgage. If I had paid that £50 a month into my mortgage I would have less than half the debt now.

The sum assured on the policy is only £12,600 and is supposed to achieve bonuses to pay off my £37,500 mortgage. Total reversionary bonuses are about £5,000 and I have 10 years left to run on it. So another £6,000 to pay in. So if they continue to add £200 per year I will end up with £19,600 and will have paid in £18,000. I dont hold out much hope of being paid a terminal bonus. Apparently it was less than 3% last year. 5 years ago it was between 40-50%. Someone's making a nice profit out of me!