Surrender, sell or keep L&G Endowments

Molly_magic_3

This is my first post so apologies if I get it wrong!

I am looking at the viability of keeping 3 L&G endowments and would appreciate some advice.

Flexible Mortgage Plan ISA Option
Target amount: £37,785
Start date: £19/6/1998
Maturity date: 19/6/2023
Monthly premium £60.84

Surrender value (at 2/9/08) £6,586.57
Total invested to date £7,483.32

Illustrations of benefit at maturity:-
5% £22,000
7% £27,800
9% £35,000

Build Up Mortgage Plan 1
Start date: 25/6/1992
Maturity date: 25/6/2017
Monthly premium: £20
Target amount: £15,164

Illustrations of benefit at maturity:-
4% £8,910
6% £10,300
8% £3,364

Surrender value £4,940.90
Terminal bonus 50%

Build Up Mortgage Plan 2
Start date: 4/2/1993
Maturity date: 4/2/2018
Monthly premium: £24.07
Target amount: £18,500

Illustrations of benefit at maturity:-
4% £10,500
6% £12,400
8% £14,400

Surrender value £5,508.16
Terminal bonus 51%

We have a fixed rate mortgage at 5.59% until 3/1/2010 but may look to use approx. £10k of any surrender / sale value for an extension.

Any help appreciated.

EdInvestor

Molly_magic wrote: »

I am looking at the viability of keeping 3 L&G endowments and would appreciate some advice.

Flexible Mortgage Plan ISA Option

This is not an endowment, it's an ISA. This is a modern tax free plan, which I suggest you keep, whether to back the mortgage or as long term investment/savings. If you are not happy with the way the money is invested inside the ISA, look at what other funds are offered and pick a selection which matches your attitude to risk.

Build Up Mortgage Plan 1
Illustrations of benefit at maturity:-
4% £8,910
6% £10,300
8% £3,364

If you surrendered this endowment and used the lump sum to reduce the mortgage, also increasing the mortgage payment by the endowment premium amount to maturity, your return would be 10,855 with no risk.

Build Up Mortgage Plan 2
Illustrations of benefit at maturity:-
4% £10,500
6% £12,400
8% £14,400.

Using the same approach with this one, your return at maturity would be 13,325 again with no risk. It's fairly unlikely that after charges, taxes and life cover you will make a return of more than 6% on the L&G policies, so there isn't any premium for taking a risk in these policies any more.

I would dump them and reduce the mortgage but keep the ISA.

Molly_magic_3

Thanks for your advice.

I am very concerned about the ISA.

The following are the plan values. Is this reduction in value typical of the current climate?

June '05 £3,691
Dec '05 £4,471
June '06 £4,892
June '07 £6,774
Dec '07 £6,607
June '08 £6,593

It concerns me that despite paying in £60 per month we are losing much more.

L&G have not given us any option to vary the way the funds are invested - only to cash in the plan, extend the term or top it up with extra payments.

dunstonh

I am very concerned about the ISA.

The following are the plan values. Is this reduction in value typical of the current climate?

It is for what is almost certainly a basic FTSE tracker.

t concerns me that despite paying in £60 per month we are losing much more.

That is the nature of the beast. It goes up and it goes down. Now is a buying opportunity. Its these periods that really help in the long term.

L&G have not given us any option to vary the way the funds are invested

Have you asked them? If you dont use an IFA they will only do what you ask them to do. Switching funds is a valid option.

EdInvestor

If it were me I would move the ISA to a discount broker which rebates charges such as www.h-l.co.uk and then invest the money in some decent quality unit trusts (say 5 to start with, with new contributions going into a sixth fund) These better quality funds are likely to show outperformance long term.

You could choose varying risk levels for the funds, which creates a better balance.FTSE100 trackers (if that is what you are in) are generally too high risk for the average UK investor.