Final question about my endowment then I'll be quiet!

Amanda65

So having to have to accept that the calculation for my endowment is based on it's value now (see post yesterday) and not that it may not pay out at the end of the term can I just ask of anyone's view on Windor Life.

My endowment was originally with a company called Regency Life, who were bought out by Aegon and is now owned by Windsor Life. We took it out in September 1988, due to mature September 2014 against a £73k loan and a currently has a surrender value of £34k. Since starting this complaint it has become apparent that we are in a high risk investment (we have only ever said we have a low to moderate attitude - yet another example of our FA not understanding our needs) so my questions are:-

1) Are Windosr Life any good as a company
2) Am I better off trying to sell my policy rather than surrender it
3) Can I convert my mortgage to repayment, not pay any more into the
endowment and just let it sit there until maturity - and is this a good
option?

Sorry - you must all be really fed up with me by now

dunstonh

1) Are Windosr Life any good as a company

adequate but nothing special.

2) Am I better off trying to sell my policy rather than surrender it

If you are in the with profits fund, then you may be. If you are in unit linked, you may cant sell these.

3) Can I convert my mortgage to repayment, not pay any more into the
endowment and just let it sit there until maturity - and is this a good
option?

As mentioned on the other thread, yes you can. The endowment can be made paid up (cease premiums but leave it there). However, that option would need to be investigated along with the surrender details. Sometimes its better to surrender. Sometimes its better to leave paid up until a certain period in the policy life or until maturity.

Sorry - you must all be really fed up with me by now

Wait until you get as many posts as me. Thats when people really get fed up with you

Things you need to be aware of, and this is linked to your other thread. When you switch to repayment mortgage, your monthly payment is going to go through the roof if you do not use the surrender value of the policy to bring the amount borrowed down. You could keep £4k of the surrender value as that is the amount you are in surplus. Or you could be prudent and pay the lot into the mortgage and bring your monthly commitment down.

Since starting this complaint it has become apparent that we are in a high risk investment (we have only ever said we have a low to moderate attitude - yet another example of our FA not understanding our needs)

I doubt the fund(s) you are invested in are high risk. I don't think I have ever come across anyone in high risk funds with an endowment. Shame really as its the cautious/balanced sector funds which have underperformed whilst the higher risk ones (in general, with a few notable exceptions) that have made the money.

EdInvestor

I doubt the fund(s) you are invested in are high risk. I don't think I have ever come across anyone in high risk funds with an endowment. Shame really as its the cautious/balanced sector funds which have underperformed whilst the higher risk ones (in general, with a few notable exceptions) that have made the money.

I do wish that advisers' attitude to risk was better aligned to that of the investing public.

So-called "balanced" funds can have 70% or more of the money or more in the stockmarket.

Some "cautious" funds have as much as 60%.Most will have at least 40%.

How many people would regard this as low risk? Not many IMHO.

EdInvestor

Amanda65 wrote:

2) Am I better off trying to sell my policy rather than surrender it

Hi Amanda

Post some details about the policy so we can take a look:

If With profits

Guaranteed sum assured
Declared bonuses
Surrender value
Monthly premium
Maturity date

If unit linked, fund it's invested in.

Will you need to replace the life assurance?

You could try a Google search for "TEPS traders" and then see if you can sell it if it's WP.Paradoxically, if someone will make you an offer, this could mean it's a good idea to hold onto it, as if they can make a profit from it, so can you. You'll get a free and unbiased outside opinion of the policy anyway.

Amanda65

dunstonh wrote:

adequate but nothing special.


I doubt the fund(s) you are invested in are high risk. I don't think I have ever come across anyone in high risk funds with an endowment. Shame really as its the cautious/balanced sector funds which have underperformed whilst the higher risk ones (in general, with a few notable exceptions) that have made the money.

On my unit statemehnt it says the investment fund is an 'Agressive life Accumulator (Special Situations)' ????

Amanda65

Edinvestor - the policy is unit linked and is invested in the Agressive Life Accumulator Series 2.

The policy matures on 5 September 2013 and current surrender value is £34,496.97 against a mortgage of £73,000. Our premiums are £100.49 per month and my husband (44 non-smoker) and I (40 non-smoker) will need to take out additional life insurance

dunstonh

I do wish that advisers' attitude to risk was better aligned to that of the investing public.
So-called "balanced" funds can have 70% or more of the money or more in the stockmarket.
Some "cautious" funds have as much as 60%.Most will have at least 40%.
How many people would regard this as low risk? Not many IMHO.

Ridiculous statement Ed.

How else do you refer to balanced managed funds in the balanced managed sector as anything else but balanced? or a cautious managed fund in the cautious managed sector?

On my unit statemehnt it says the investment fund is an 'Agressive life Accumulator (Special Situations)' ????

OK, that means you cannot sell it as it's unit linked.

There are a couple of funds that could be as not one has that exact name. Windsor Aegon Aggressive S2 life fund (which is probably the one) has actually spent most of its life in the top half as far as investment returns go. Over 10 years, it was ranked 25 out of 257 qualifying funds in it's sector.

You started yours 17 years ago and the fund has performed at an average 7.71% p.a. over those 17 years. Assuming a target growth rate of 7%, this puts the performance above target and would explain your surplus of currently just over £4000. There is no reason to think that sort of performance is unlikely to continue. Especially considering the recent years where you have bought units much cheaper than in the past.

Indeed, this really does make the projections given to you at 3,4 & 5% look inappropriate. It would be nice to get a 7% projection (or a 6 and 8% ideally) out of windsor life as that would be the appropriate level they should be using for this fund.

On the limited information on this and the other thread, the endowment has actually proven to be a good one and still continues to offer good potential to hit target and provide a surplus. Especially as its already in surplus at this time.

EdInvestor

Hi Amanda

If you surrendered the policy and put it in the bank @4% also paying in the premiums until maturity you should end up with 58,111.

If you are paying 6% on your mortgage and you instead used the S/V to reduce that, and upped the mortgage payment to include the endowment premiums to maturity, the equivalent return would be 67,247.

A return of 7% would net 72,051, so you do need more than that, as these figures don't factor in the cost of life assurance or charges.

IMHO you need to find out the cost of the life assurance, and also ponder how much you need certainty in repaying the mortgage, compared with taking a risk that the policy is going to return at least as much or more in the future as it has done in the past, despite the fact we are now in the low inflation/low interest rate environment.

DH says there is no reason to think returns will be lower in future: I suspect he's basically alone in this thinking.Indeed that's the reason all the insurers have reduced their projections, because everyone, including the FSA, thinks the opposite.They may, of course, all be wrong. But it's a risk you should be aware of.

oceanblue_3

EdInvestor wrote:

DH says there is no reason to think returns will be lower in future: I suspect he's basically alone in this thinking.Indeed that's the reason all the insurers have reduced their projections, because everyone, including the FSA, thinks the opposite.They may, of course, all be wrong. But it's a risk you should be aware of.

He is not alone in his thinking; given the nature of the fund under discussion, it does seem inappropriate to assume lower rates of growth.

The FSA has instructed life companies to assume lower rates principally for with-profits funds whose equity exposure is below 50% of the value of the fund. This is not a with-profits fund; furthermore, it has achieved in excess of 7% annual investment return since inception.

Finally, your analysis of risk is fundamentally flawed: any assessment of risk must take into account the duration of the investment.

dunstonh

DH says there is no reason to think returns will be lower in future: I suspect he's basically alone in this thinking.Indeed that's the reason all the insurers have reduced their projections, because everyone, including the FSA, thinks the opposite.They may, of course, all be wrong. But it's a risk you should be aware of.

I beg your pardon? The UK stockmarket is estimated to grow around 9% a year for the coming years. No-one knows the future but the potential is certainly there.

average performance over last 12 months has been 17.76%pa. 2 years = 15.24%, 3 years 15.60%, 4 years 7.17%, 5 years, 0.06%, 6 years 4.71%, 7 years 8.54%, 8 years 6.82%, 9 years 7.41% 10 years 7.35%. So 7% average over the term is certainly within the potential as has been seen in the past with only the crash years showing that lack of growth for obvious reasons.

£34,000 now, possibly higher without surrender penatly plus £100pm has a very good chance of hitting target and still providing a surplus. Due to the investment risk side though, it could still result in a shortfall. i.e. if there was a stockmarket crash before maturity. Switching to repayment mortgage is the only risk free option. However, as an endowment goes, this appears to be perfectly fine and at this stage on track for surplus.

Ed, in his calculations, is working from the surrender value not the current value so those figures cannot be compared against the potential of the endowment remaining where it is.

Indeed that's the reason all the insurers have reduced their projections, because everyone, including the FSA, thinks the opposite

This is inaccurate and misleading and should be ignored. The FSA state that 5,7 & 9% should be used for tax free investments and 4,6 & 8% used for non tax free investments. If this fund was being used for new business illustration today, the 4, 6 & 8% figures would be used in compliance with the FSA rules.

The reduced percentages used on endowment projections is a subject we covered in the other thread and as mentioned in that, those projections do not link with the potential of the investment funds. They can both under estimate and over estimate.

Because the charging structure isnt known, we dont know if you are still paying for the life assurance side in those premiums and we dont know the allocation rate used on the investments. You may find that 100% of the premium is going into the endowment as the cost of life cover was taken in the early years. These are unknowns to us based on what you have posted so far.