Can I surrender endowment policy while on benefits?

martinsimpson

Hi All. Like most peoples endowments mine has performed badly. It's a 25 year policy with 5 years left to run and I expect the shortfall to be around £18,000. It would be better now savings rates are higher to surrender the policy and put the £25,000 surrender value in a high interest account. But if I do this will I violate the DWP's £6,000 savings rule and have my benefit stopped? Obviously this endowment money needs to go towards paying off my mortgage as it was intended to do so I would not be happy to use it to live off. If it is not counted as income by the DWP will any interest earned on the £25,000 be subject to benefits rules on income?

EdInvestor

Yes it will impact your benefits if you cash it in. One of the cases where it's best not to.

dunstonh

Endowments are not included in any means test for benefits whilst they are still running. The minute you surrender one and dont pay off the mortgage with it, it becomes treated as savings & investments as far as the means test goes.

Most endowments are not as bad as people think. What are the details on yours?

martinsimpson

I think my endowment is rather bad because even if it has 6% growth over the next five years it will still leave me with an £18,000 shortfall! thanks for your information. That makes things clearer.

dunstonh

martinsimpson wrote: »

I think my endowment is rather bad because even if it has 6% growth over the next five years it will still leave me with an £18,000 shortfall! thanks for your information. That makes things clearer.

Even endowments that go on to provide a surplus still often so shortfall at 6%. The projection method alone is not reliable to judge an endowment by.