Endowment Surrender Yes/No ??

Dunx67

Can anyone help me. I am getting divorced and will have to start again on the property ladder. I currently have two endowment policies and having read a few of the threads in this forum am wondering if I'm better surrendering them and using as a deposit for a new mortgage?

First is with Standard Life . This is joint with my Ex but she is signing her interest to me.

Started 5/1/93 Maturity 5/1/13

Sum assured £58003
Monthly Premium £113.74
Most recent surrender value was Jan 08 £22773 plus final bonus £6033, total £28806.

SL Quote illustrations of Low rate £39300, Med £42500, High £45900. (4,6,8%?)

In addition though this policy has a discretionary top up payment available from SL (mortgage endowment promise) which is estimated by them as between £3121 and £4682 on maturity, it has no surrender benefit.

The second policy is a Legal and General Low start endowment

Started 3/7/89 matures 3/7/14
Basic sum assured £10404
Life Cover £34000
Target £34000
Monthly premium £47.20
Latest surrender value I have is Jan 08 at £16118

A teminal bonus of 107% is listed on the most recent statement but no value in respect of surrender.

I have no illustrations on the policy recently but in 2006 when last sent they were 4%-£24100 6%-£27,700 8%-£31600.

Are either or both worth retaining?

If they are worth cashing in is there a way to get more that their surrender value by trading them?

Thanks in advance for your advice

Dunx67

Wow, no one got a view on these???

Dick_here

I'd cash in the first and keep the second.

You'll have nearly 30k for a deposit and an extra £113pm to pay a new mortgage with.

With only 6 years to go on the latter it's worth keeping, IMHO.

EdInvestor

Please ring up and update the surrender values and projections. Approx what interest rate do you expect to have to pay on your new mortgage?

Dunx67

Right here goes.

Legal and General
Surrender £16233.40 (has grown £115 for £330 of premiums in 7 months!!)
Premium £47.20
Illustrations 4% £23800 6% £26300 8% £28,800

Standard Life

Surrender £29648.32 (this has grown £842 for £796 of premiums in 7 months)
Premium £113.74
Illustrations 3.75% £37000 5.25% £39600 7.25% £42,400

In addition the SL policy is elligible for the endowment promise which means that if it doesn't reach it's target then there is a top up guarenteed which at present is betwen £3121 and £4681.

As for Mortgage rate, 6% would be about what I would look for as effectively a first time buyer.

Thanks again for the help

dimbo61

If you cash in one or both is up to you but that depends on your own needs.
£30k plus £16k would be a good deposit where I live but we dont know all
your finances following the divorce ( been there done that !)
If you need the money then cash them in rather than pay 6/6.5% on an even bigger mortgage.
You might get a better deal if you are putting down 10/15% deposit and the cost of the endowments each month means you can borrow less !
Take out cheap level term life cover with cavendish online and have a repayment mortgage fixed for at least 5 years if you can.
You do not mention age, kids,job, pension, savings,shares, etc if your EX is selling the family home.
Lots of things to take into account and policies were taken out to pay off mortgage on property you no longer live in. GOOD LUCK
DONT forget CSA if you have kids !!!!
so you

Dunx67

Any more views on this folks please. Struggling with the maths a bit

EdInvestor

Dunx67 wrote: »

Legal and General
Illustrations 4% £23800 6% £26300 8% £28,800

With this one, if you surrendewred it and used the lumpsum as a deposit and the premiukms to pay a mortgage @6%, your return at maturity would be 27,088 with no risk, which beats their risk-based 6% return.

Standard Life

Illustrations 3.75% £37000 5.25% £39600 7.25% £42,400

With this one, proceeding as above, you would end up with 47,636 at maturity which beats their best projection even if you include the mortgage promise, and again presents no risk.

You may like to see if you can get a bit more for them here:

https://www.apmm.org

Dunx67

Thnaks Edinvestor, do the figures you use include terminal bonuses as a consideration?

Thanks

dunstonh

It needs to be noted that the projections are the rates of growth before charges. It is not net of charges. SL have been exceeding 7% after charges. Doesnt mean they still will but you need to look at the projections in context with potential and the "best projection" has been understating the real return for many years now.

EdInvestor

Dunx67 wrote: »

Thnaks Edinvestor, do the figures you use include terminal bonuses as a consideration?

Thanks

Yes the TB element is included in the surrender value.

Re dunstonh's comment about charges, the returns I quote from paying off mortgage are of course 'clean' returns - there are no charges.

You probably need to deduct at least 1.5% from the projections to cover the charges, so if the endowment makes 6%, the real return will be 4.5%. IIRC the projections do usually include the taxes you pay on gains in the endowment (which of course you don't pay when you use the money to reduce the mortgage.)