Will our endowment ever make money?

leftieM

Can we reinvest the endowment fund into another vehicle to stop it losing money? We switched to a full repayment mortgage so now we're hoping to have a few quid when the endowment matures in 2024 to educate the children. However the endowment is leaking money and I'm concerned that we may not even get back what we paid in.
A friend mentioned switching to unit trusts. To be honest, i don't know what these are. Has anyone gone down this route or is it even possible?

Froggitt

After only six years, you are unlikely to get back what you paid in (upfront charges loading etc). You have to take a view as to what its likely to return....and the consensus opinion is not good.

Unit trusts are generally invested widely like an endowment, but are priced based on the actual value of the underlying investments as they go up and dpwn......no "smoothing" as in an endowment (although all the smoothing going on at the moment seems to be away from the investor and into the funds).

You'd need to cash in the endowment, and find an IFA to invest your monies into a suitable unit trust or OIEC (eg European, Asian, Worldwide, UK).....take a look at some of the Fidelity funds. Dont use the IFA who sold you the endowment in 1999 as he deserves no more of your money. And dont bank on educating the kids with the endowment proceeds.......a few choc ices maybe!!!

EdInvestor

Hi leftiem,

Tell us a bit more about your endowment so we can see if it can be made to perform better, or whether it's best to surrender and reinvest.

Company it's with
Fund(s) it's invested in
Guaranteed sum assured and declared bonuses so far
Current value
Surrender value
Monthly premium
Maturity date

dunstonh

In addition to above, you may also find that the endowment provider offers a range of funds which work in a similar way to unit trusts. Switching your fund and redirecting your contributions may be an option available to you. As endowments are front loaded with the charges, you may find, that if a fund range is available to you, that this is the cheapest and best option going forward.

From start to finish, it would be the more expensive option when compared to unit trusts. However, you have already paid those charges so they are done and dusted and there is nothing we can do about that. We can only look forward, and thats where the alternative funds within the endowment could prove useful.

You'd need to cash in the endowment, and find an IFA to invest your monies into a suitable unit trust or OIEC

Before you do that, you really do need to find out about the endowment. Without knowing the details, cashing it in could be the worst possible solution.

You have to take a view as to what its likely to return....and the consensus opinion is not good.

Endowmwents are just a product wrapper. They do not make or lose money. It is where they are invested that matters. There are endowment funds which are awful but there are also endowment funds that are performing superbly. Without knowing where it is invested at present and who with, it is impossible to say whether it is good or bad.

leftieM

The endowment is with Royal and SunAlliance. The sum assured is £12,931. The guaranteed death benefit is £28500. The monthly premium is £54.71. Maturity date is 22/02/2024. Total bonus to 31/12/03 is £601.50. The sum for this year isn't much more than that.
Any insights? I don't know what the surrender value is. How would I find out?

EdInvestor

Hi Leftie,

Good start.

Call up R&SA to find out the surrender value.

Note that if you continue to pay in, the guaranteed minimum you will get at maturity is around 13,500, plus free life cover for the period.

leftieM

I got the surrender value today - it's worth £4170. To date we've paid in £4550.
Any advice on what to do? Do these figures look good?
Thank you for any advice.

EdInvestor

LeftieM

If you took the surrender value and put it in the bank @4% also paying in the monthly premiums until maturity you should get 27,442.[If you need to replace the life assurance you'd need to deduct the cost of that.]

This compares with a guaranteed value of 13,500 at maturity.One cannot expect anything in the way of a terminal bonus from a RSA policy and annual bonuses are also likely to be miniscule as this is now a zombie fund.

So I should look to reinvest elsewhere - or to use the money to reduce the amount owed on your mortgage as that might generate a better return than saving at present as you pay no tax.

leftieM

That's what I thought myself. Thank you.

jimjoeray

Every six months I contact Phoenix for a surrender value and an estimated maturity value. In the past six months I have continued making payments and the stock market has been performing well but Phoenix have REDUCED the surrender value from £9740 to £9234 and the estimated maturity value by another £1000!!

This seems so unfair. Are there no regulations to protect people like me?

EdInvestor

This may be of interest:

Phoenix action group plan