I'll never understand my endowment policy

chaickenfan

Hi, my endowment matures in August 2012. Can anyone explain why the maturity forecasts have gone up when the surrender value has gone down?

Surrender value (1 July 2008) - £36,200
Surrender value (1 August 2008) - £34500.

Maturity Forecasts August 2007

@4% £45,300 @5.5% £46,600 @8% £49,700

Maturity Forecasts August 2008

@4% £48,400 @5.5& £49,500 @8% £52000

The reason the surrender value dropped by so much in one month is explained here
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4358615.ece

Rabiddog_2

My take on it is this.. If you were to surrender your policy now, its worth 34500.. this is because the general stock market has dropped by about 15-20% from its peaks last year. However the maturity value has to be worked out on a std, even 4%, 5.5% increase etc every year. The stock market doesnt work like that of course, it goes up down sideways .. but over the long-term,(10,25,50 years) average stock market growth is in the region of between 4% and 10%.
Yours has about 4 years to run and of course would/Might have a maturity bonus added to it, so it looks as if its not too far off.

chaickenfan

Thanks Rabiddog

I could understand your reasoning if the policy had 10 years to run but with only four years left its hard to understand why the maturity values have risen.

Surrendalink offered to buy this policy for £38000 but dropped their offer to £35400 once the value had dropped so they obviously think that the value on maturity will be lower than it was a year ago.

EdInvestor

chaickenfan wrote: »

Thanks Rabiddog

I could understand your reasoning if the policy had 10 years to run but with only four years left its hard to understand why the maturity values have risen.

.

They really ought to have projections which also show the maturity value at 0% growth, -3%,- 4.5% and -8%.

But then people might grasp the point that their policy value might go down!

That would never do.;)

dunstonh

There are a few reasons why surrender value has gone down whilst projections have gone up. Terminal bonus has increased but is subject to an MVR if surrendered (but not on maturity) is probably the likely version.

The fact the 8% projection has increased suggests the endowment has been exceeding 8% a year.

chaickenfan

Thanks All

If I can get £38,000 for it then I'll sell. Surrendalink say they will give me this if I can prove it was worth £36,200 on 1 July.

Its not worth selling for anything less I think.