Endowment Assurance with Options

carol252

Hi, I wonder if someone could help me with this..........In 1996 my insurance man sold me one of these policies as a savings plan. The premium is £25.50 per month, at the time he explained that this policy could be drawn on after 10 years but it would be far better to keep it for a further five years because during that time the bonuses would really do well and the final payout would probably be three times what I had paid in. As the 10 years approached I discussed this policy with my new insurance man as the most recent yearly bonus notifications I had been receiving only showed around £19 per year bonus! - I wondered whether to cash it in or leave it for the further 5 years as originally advised - he told me the policy could not be finalised after 10 years they did not do policies like that, and as for the original forecast he just said it was like any other endowment and they had not performed well. Do you think I should persue this as being missold to me? Also do you think its worth me carrying on paying the monthly installments until 2011? Any help would be greatly appreciated. Thanks.

EdInvestor

Post some more info about the policy

Provider
Guaranteed sum assured
Declared bonuses
Surrender value
Maturity forecasts

carol252

Provider - CIS
Guaranteed Sum Assured - £4.000 with profits
Declared bonuses - not sure what this is but on the 2007 statement total bonuses were £688.18
Surrender value -Don't know
Maturity Forcast - estimated at 4% - £5,630 nad 7.5% - £6,6320

Thanks

dunstonh

This appears to be a "savings" endowment so the mortgage endowment issues dont apply to it (i.e. you cant complain you should have been sold a repayment mortgage).

1 - do you have any evidence that you were told these options that existed?
2 - are you sure options do not exist (extensions are possible with some plans providing you dont wait until its qualified and/or it doesnt break qualifying rules)?

BTW, dont get financial advise from an insurance sales rep. You are looking at lower skilled, lower knowledge individuals with sales targets selling generally poor quality and expensive products from a limited range of products available. The new sales rep may not know what the options are on a 1996 plan. Has the policy booklet been reviewed or have you got it in writing from CIS that the options dont exist?

EdInvestor

Please ring up and get the surrender value.

carol252

Thanks for your replies and advice, I will ask for a surrender value. The only 'evidence' I have is notes I jotted down on a bit of paper when the original insurance man sold me the policy. From what I can gather, although terminal bonuses are sometimes not added to certain policies, the person I spoke to last at CIS seemed to think a terminal bonus would be added to this particular policy and therefore may be worth carrying on with. I was just wondering, as, like you say, insurance people are not financial advisors and I am just a bit confused and concerned. I had an endowment mortgage which did manage to pay off the mortgage with a bit left over, but not the nice nestegg I had been hoping for, I was also encourged to invest in unit trusts and that didn't work out either, so I'm getting a little dissolutioned with savings schemes!

dunstonh

CIS employees are not allowed to recommend the cancellation/surrender of their own plans. The old "best to keep it until maturity" mantra was spread by the insurance agents over the years based on their limited ability to give advice. A duff product should be dumped if the cost and potential of alternatives are better.

I was also encourged to invest in unit trusts and that didn't work out either, so I'm getting a little dissolutioned with savings schemes!

There are over 2000 unit trusts ranging from low risk to very high risk. You can fit most risk profiles with unit trusts but they do change in value daily and will have periods when they go down as well as up. They are a very good option for investing but you do need to understand how they work. Failure to understand that they will zig zag in value can give the wrong impression. Regular contribution unit trusts really need 10-15 years at least to get the best out of them.

EdInvestor

carol252 wrote: »

I'm getting a little dissolutioned with savings schemes!

The word you're after is "disillusioned" but I'm sure many people would agree with you that endowments have acted as a "dissolution" to the challenge of getting wealthier.

carol252

Hi, thanks for your replies. I have obtained a surrender value on the policy today - £4,177.00 which is £607 return over the last 11 years and 8 months. Do you think it is worth keeping this policy until Novembr 2011 when it matures and hope that the terminal bonus will be good?

EdInvestor

carol252 wrote: »

Maturity Forcast - estimated at 4% - £5,630 nad 7.5% - £6,6320

If you cashed the policy in and put 3,600 in a top-paying cash ISA and the rest in another savings account getting 6% overall, also paying in the premiums to the account, at maturity you would have 6,000.

So there's little point in taking a risk with this policy, as you are likely to do less well or no better than saving in cash with no risk.

carol252

Hi, thanks for your advice. I already have a cash ISA but the gross interest rate is only 5%, am I right in thinking you can only have 1 ISA? If so, it looks like I might be better to close this account and reinvest in another one with a higher interest rate? Or perhaps not as I can only put £3,600 in it.