Royal Life / Sun Alliance Endowment Shortfall - Keep or Sell ?

ScoobyZ

Hi just reviewing my mortgage etc and was wondering weather to keep my 15.5 year old endowment ?

I see there are some experts here that give good advice so any help would be appreciated.

Please note this was a low start endowment with payments as follows:

1st year: £31.40 x 12 monthly payments
2nd year: £37.68 " "
3rd year: £43.96 " "
4th Year £50.24 " "
5th Year £62.80 .................until 25th year

The details are as follows.

Letter dated April 2005

Target amount:
£39500

Monthly Premium £62.80

Maturity Date 02/04/2015

3.75% 4.50% 5.25% Target

Projected amount £22,500 £23,900 £25,400 £39,500

Projected shortfall £17,000 £15,600 £14,100

---

I'm going to call tomorrow to see what the surrender value is.

I have already complained and was awarded just over £4000 a year ago.

I have worked out I have paid about £10700. Not sure what it would be worth if I sold it.

Thanks in advance.

EdInvestor

Hi ScoobyZ

Let us know the surrender value and also the guaranteed sum assured and declared bonuses amounts. You won't be able to sell the endowment as RSA policies are now in zombie territory.

Check back thru this forum for more threads on the problems at RSA/Phoenix.

ScoobyZ

EdInvestor wrote:

Hi ScoobyZ

Let us know the surrender value and also the guaranteed sum assured and declared bonuses amounts. You won't be able to sell the endowment as RSA policies are now in zombie territory.

Check back thru this forum for more threads on the problems at RSA/Phoenix.

Hi surrender value is: £10303 (I called today)

GSA is £12,087 - (I think this it, its on policy as £12,087 with profits)

I can only find my 2003 bonus statement but it says:

min def ben £39500
maturity date 02/04/2015
amount on which basic is calculated £12087
Bonuses earned to 31.12.2002 £5310.63
new bonuses this year £43.49
total bonuses earned to the 31.12.2003 £5354.12

If I fond more recent one will post. Hopefully you may be able to help with the above info.

ScoobyZ

Called today for an upto date statement too, just incase I can't find the recent one in the loft tonight.

EdInvestor

OK, if you surrendered the policy and put it in the bank @4% until maturity also paying in the premiums, you would end up with 24,523.

Currently you are guaranteed if you keep paying to maturity only 17,441 and as you can see bonuses have dwindled to very little.You are in a zombie fund and you can't expect any terminal bonus. We also gather from other posters' reports that guaranteed values are likely to be subject to cuts at maturity.

If I were you I would take the money and run, use it (and the compo money) to reduce the money owed on the mortgage and increase the mortgage payments by the amount of the endowment premium.You may want to sit down with a mortgage broker and see if you can find a cheap remortgage deal so your monthly outgoings don't go up too much.

Hopefully you will not need to replace the life cover.If you do shop around for the cheapest.

Not a good situation to be in, good luck in sorting it out

ScoobyZ

OK thanks for the advice.

It's not all doom and gloom as I have a buy to let that has done OK in last couple of years.

I will look to cash this in (sell if I can) be nice to loose the worry of it to be honest.

I have done alot of research and believe I can reduce my monthly payments and still pay my mortgage of by the time im 47 (in 10 years or maybe earlier depending on house prices) by usuing the equity / profit in the buy to let.

Kellm9

Hi ScoobyZ and Edinvestor,

I have been following this thread because I am in exactly the same situation. If I post same details (will need to call for surrender value) could you please do same calcs for me ? I have thought of surrendering before but have always thought I would loose out. I was under the impression these policies return more in the later stages, nearer to maturity.

Regards
Kellm9

dunstonh

but have always thought I would loose out. I was under the impression these policies return more in the later stages, nearer to maturity.

They do generally. However, you could be in a fund thats returning 1% or a fund returning 9%. If the 1% fund has limited potential to ever pay much more, then there is usually little point staying there unless there is really big penalty. If the fund is paying 9%, then its usually better staying there, if you accept the risk. However, even that can be reduced in a number of cases.

EdInvestor

Kellm9 wrote:

Hi ScoobyZ and Edinvestor,

I have been following this thread because I am in exactly the same situation. If I post same details (will need to call for surrender value) could you please do same calcs for me ?

Sure, no problem

Kellm9

Hi dunstonh,

Thanks for your reply. I'm not sure about the fund i'm in or how much it returns.

EdInvestor wrote:

Sure, no problem

Okay here goes.

Policy nos 1. Royal Life.
Endowment Homebuyers.
£6,399 with profits.
Guaranteed min death benefit £19,750.
Maturity 21/9/2010
Monthly premium £28.65
Surrender Value as of today 18/11/05 £10252.
From 2004 Bonus declaration.
Amount on which basic is calculated £6399
Bonuses earned to 31.12.2003 £5468.56
new bonuses this year (end 04)£29.67
total bonuses earned to 31.12.2004 £5498.23


Policy nos 2. Royal Life.
Endowment Homebuyers.
£14,650 with profits.
Guaranteed min death benefit £38,250.
Maturity 13/12/2010
Monthly premium £70.63
Surrender Value as of today 18/11/05 £16,831
From 2004 Bonus declaration.
Amount on which basic is calculated £14650
Bonuses earned to 31.12.2003 £7847.65
new bonuses this year (end 04)£56.24
total bonuses earned to 31.12.2004 £7903.89

My understanding is that policy 1 max = £6399 + Exist bonus £5498 + any future bonus +terminal bonus = £11897 + future bonuses (likely very small).
and policy 2 max = £14,650 + Exist bonus £7903 + any future bonus +terminal bonus = £22553 + future bonuses (likely very small).

I do have the feeling that these policies will return the absolute bare legal minimum. So it may be better to surrender and invest premiums elsewhere. I'm just not sure of the calcs etc.

Any advice greatly appreciated.
Regards
Kellm9

EdInvestor

Hi kellm9

Your situation is much the same as that of the OP. If you surrendered policy 1 and put it in the bank @4%, also paying in the premiums until maturity, you would end up with 14,399, compared with your guaranteed value of 11,897, which is unlikely to increase or to be topped up by any terminal bonus.

Ditto for policy 2, you would receive 25,192, compared with a guaranteed value of 22,554.

Unless you would need to replace the life cover at great expense, the way forward looks clear, see above.

Note that if your mortgage interest rate is higher than 4% you would receive a higher return by using the money to reduce the size of the mortgage owed.