Surrender endowment policy or not?

Toiletduck

Hi,

I have a poorly performing endowment policy with the Co-op, its 11 years intoa 25 year term. So far Ive paid into it £2800 which has earned £830 in bonus's, however most of the bonus was earned in the early years, the last 4 or 5 years have earned a paltry £20ish a year. Its surrender value is £3034, Ive tried to sell it online but no one is interested.

I know there is the possibility of a final bonus but this is not guarenteed and I wouldnt know if I would get one until the policy matured. Seeing as I could get £180 a year in interest on the surrender value now in an ISA Im thinking of doing that. Does this sound wise? Another point is the talks of a merger with Britannia, I know they are saying a windfall is not going to happen but Id kick myself if i got rid of it only to loose out a few months later, should I hang onto it whilst things become clear on that front?

Cheers

Andy

pumpndump

Usually, you should stick with the policy, unless some outside emergency forces you to sell it.

Toiletduck

pumpndump wrote: »

Usually, you should stick with the policy, unless some outside emergency forces you to sell it.

I know I should stick it out and hope for a final bonus to be added - but Im currently loosing £140 a year comparing the bonus it receives at the moment with the ammount Id expect from the surrender value put in an ISA. That would add up to a considerable ammount over the next 10 years. How much do you usually get as a terminal bonus? Is it allways paid? The statements say a final bonus "may" be payable on maturity.

aHullKingstonRover

Hi Andy,

I believe you can convert CIS's Low Cost Endowment's into a mortgage if you ever wanted to; if you don't already have a mortgage, your policy might be worth hanging on to especially given the current dire financial climate and the potential future difficulties of raising large sums of money, say, to buy a house...

Don't forget the policy also covers you for life assurance too.

And although it's not performing as well as you expected, CIS are good at honoring final bonus payments.

CIS is currently offering 4.25% on its cash ISA's if you chose to surrender your policy and transfer the money in-house.

http://www.co-operativebank.co.uk/servlet/Satellite/1193206370514,CFSweb/Page/Bank-Savings

baby_boomer

Where is this final bonus going to come from?

The Co-op's profits from your investments on the stock market?

The trouble with cashing in now is that I imagine there's a hefty market value reduction.

To do your sums you need:

a) An absolutely up to date surrender value
b) An answer from the Co-op what your policy would be worth if the underlying investments were to gain 6% from today until your policy maturity.

Then you work out what you might make by reinvesting:

1) the lump sum
2) your future monthly contributions until the end of the policy

pumpndump

Toiletduck wrote: »

I know I should stick it out and hope for a final bonus to be added - but Im currently loosing £140 a year comparing the bonus it receives at the moment with the ammount Id expect from the surrender value put in an ISA. That would add up to a considerable ammount over the next 10 years. How much do you usually get as a terminal bonus? Is it allways paid? The statements say a final bonus "may" be payable on maturity.

Then it depends where they've put the money. They might have put it in the stock market, in which case that is one reason why your surrender is so low. The advantage for you here is that your premium is buying more units. When the market goes back up again that will be to your advantage. If they have put all or most of your money into government bonds (most likely)then it will take years before the effects of compound interest kicks in. The older the policy, the more chance you will get of finding a buyer. Our firm buys life assurance policies, but we will not touch yours.

bristolleedsfan

aHullKingstonRover wrote: »

CIS is currently offering 4.25% on its cash ISA's

Now I see why Britannia and Co-Op believe that they are a excellent strategic match. :rolleyes:


http://www.britannia.co.uk/home/c_savings/product/rates/current/taxfree.html#cashisa

CIS rate reflects last 0.50% Base rate decrease, Britannias rate doesnt yet. :eek: