Can I Surrender Endowment To Part Pay Off Mortgage While Receiving Benefits?

martinsimpson

Hi All.

Like most people's endowments mine has performed badly. It's a 25 year policy with 5 years left to run and I expect the shortfall to be around £18,000. It would be better to surrender the policy now and use the money to pay off more than half of my mortgage. But if I do this will I violate any DWP rules (£6,000 savings rule for example) and have my benefit stopped or reduced? Will they allow me to surrender my endowment and use it to part pay off my mortgage as the endowment is intended to do. I don't want to keep it while the world markets are in utter turmoil

Anyone have any reliable sources of information about this?

Many thanks

the-chauffeur_2

Martin

This is potentially a very tricky question. No, strike that - it is a tricky question.

My guess is that if you cash the policy and immediately transfer the entire proceeds to your lender, you would have no problem with the DWP. What they don't want is people with savings they could otherwise live on getting benefits (otherwise lots of people would want to do it). If you use the money to pay off some of your mortgage, it's not available to you to use in place of benefits. However, if you withhold some of it (and more than £6k), they'll probably terminate your benefit.

But don't take my word for it. In fact, be very careful what advice you take - like I said, tricky. You'll really need to speak to someone at the DWP offices who can clarify the benefit criteria and methods of means testing before making any big decisions.