Endowment with the Pru - cash in now or not?

firecloud

We have two endowments with the Prudential which are intended to pay off our mortgage of 35,000 when they mature 01/12/2009.
At the moment there is no predicted shortfall and the current surrender values of 11,135 and 28,568 (which is guaranteed only for another 2 days) will pay off the mortgage easily, even with early redemption penalties. With the Pru's good record we had intended to let the policies run to term but with the current financial market and the ever worsening economic situation we don't take anything for granted. Question is, should cash them in and maybe loose around 2,400 Pounds (at assumed future rates of investment return of 4% a year, or nearly 5,000 Pounds at an assumed rate of 8%) that we could have had in final bonuses? That way we could repay the mortgage (with the Woolwich) early, ensuring that we will have a house to live in even in the worst case scenario of the Pru running into severe financial difficulty. Our financial situation is not flexible enough to find other funds should this happen, so we need to ensure that we have enough funds when the mortgage is due shortly after the endowments mature. I am wondering if anyone is willing to offer an opinion?

dunstonh

My sept and oct statements for Pru endowments showed increased projections over last year. Index linked gilts in have had a good year and Pru did move a large amount of money into the fixed interest sector before the stockmarket decline happened. They do have a good track record of getting it right. Doesnt mean they always will but its nice to know.

The projections and valuations I have been getting through have shown the 8% figure increasing as well which indicates the annual return was over 8% net.

EdInvestor

firecloud wrote: »

We have two endowments with the Prudential which are intended to pay off our mortgage of 35,000 when they mature 01/12/2009.
... the current surrender values of 11,135 and 28,568 (which is guaranteed only for another 2 days) will pay off the mortgage easily, even with early redemption penalties.

If you want certainty then it's obvious what you should do.

You could always hedge your bets by cashing in one and reducing the mortgage and taking a punt on the other.

One doubts however that WP maturity outcomes will be on anything other than a flat or declining trend over the next 18 months.

firecloud

Thanks very much. We decided to sit on it a bit longer and asked for updated surrender values. They have gone up by about 355 Pounds in one month for the two policies, though I don't think that can be sustainable in the future. After hearing on the news earlier that a major Japanese insurance company has gone bankrupt I am thinking it is time to make our move as soon as the paperwork with our latest figures arrives from the Pru. I did read somewhere that they have made many fairly recent investments in Eastern markets? Unfortunately we are not in a position to gamble, not in a climate where it is near impossible to get loans or mortgages. One other thing I am uncertain about is what to do with the money when we get it. Ideally we should pay off the mortgage there and then, but the Woolwich will penalise us for paying off early, reducing the profits from the endowments even further (I am not being flippant here, they were earmarked for some major renovation work that is necessary on the house). At the same time I can't help wondering whether our savings are safe anywhere at all and it may be more sensible to get rid of debt if funds are available.

hansi

It wss interesting to see what dunstonh had to say about Prudential endowments. I took out a Scot Am endowment policy in 1985 to cover a mortgage of £25K (those were the days). I emailed the Pru over the weekend to ask about the current surender value and it now stands at just over that figure. It matures in 2010 so I'm hoping for a bit more growth and the terminal bonus:beer: