Friends Provident Endowment advice please!!!

pillsbury33

Dear MSEs

I'm after some advice for my mother and the increasingly paltry return on her Endowment (if I've missed any vital info please let me know and I'll get it):

Policy Type = Mort endowment plan
Prem per month = £30.76
Sum !!! £22,210
Latest Prog = 4% £12,000
5.5% £13,300
8% £15,700
Latest surr £7,163
Mat Date 19.09.2016

She currently has a mortgage of £25k, in addition to the premium above, she also pays Abbey £150 per month. My calculations therefore show with 8 years remaining she'll pay c.£17k with a realistic return of £12k from the Endowment. Leaving a £13k shortfall, but a potential total of £30k to find over the next 8 years.

The question is: would it be advisable to cash in the Endowment (c.£8k when called FP yesterday)? Lend £17k from her kindly son (at a very attractive rate of interest - for her that is), and pay the mortgage off?

Am I missing something? As always, your kind wisdom would be much appreciated.

Ps she never had the sense to sue them for mis-selling. She was told she would have a surplus after the 25 years. Is it still possible to sue? Citing stupidity or some other form of sticking your head in the sand syndrome?
:beer:

dunstonh

Ps she never had the sense to sue them for mis-selling.

Most people have not chosen to the option to sue.

She was told she would have a surplus after the 25 years.

If she has evidence of that then it would be a very strong complaint. However, if its verbal then that isnt good enough. After all this time was it "could have a lump sum at the end" or "would have a lump sum at the end". First is compliant. Second is an upheld complaint. One letter difference.

Is it still possible to sue? Citing stupidity or some other form of sticking your head in the sand syndrome?

You dont sue. You complain using the FSA authorised complaints process. FP have been very active in time barring people. Its unlikely give the mid projection that she still has time left to complain. Most timebars kicked in last year.

EdInvestor

What interest rate is she paying on the mortgage?

pillsbury33

Thanks dunstonh

I'll ask her to check if she has anything in writing, but I doubt it.

Hello EdInvestor

There's no special deal on the mortgage, she says she's paying the variable rate which she thinks is either 6.25 or 6.5%.

pillsbury33

Ignore that. I just got her to check, it's 7.9%.

EdInvestor

pillsbury33 wrote: »

Latest Prog = 4% £12,000
5.5% £13,300
8% £15,700

The Abbey SVR is 7.09%. Assuming the surrender value is 7163, then if she cashes in the policy now, uses the lump sum to reduce the mortgage, and adds the endowment premium amount to the monthly mortgage payment, at maturity her return would be 16,365. This comprehensively beats the endowment projections.

So binning the policy looks like the way to go and overpaying the mortgage by as much as she can manage will also help by reducing the total interest payable.She should do some sums to work out the optimal amount of overpayment bearing in mind that interest rates should start coming down fairly soon.

dunstonh

This comprehensively beats the endowment projections.

Which are only examples and not indicative of the actual return that may be received. Going forward, a unit linked endowment could offer greater potential than the 8% projection as we are so much lower than it was in recent times.

Whatever decision is made, there is no way to tell which is best until you look back in time and use hindsight.

pillsbury33

Thanks EdInvestor & dunstonh

Once I add in the soft benefit of being mortgage free, I think this is the way to go. Now, if I can only find my missing money from KE I may aswell transfer it to her.

One last question: is it generally best to sell the endowment back to the provider, or is it worth trying a broker? I've seen a few horror stories on here, and was wondering if you had any opinions on the best route to get rid of it?

dunstonh

Is your endomwent unit linked, unitised with profits or conventional with profits?

pillsbury33

dunstonh wrote: »

Is your endomwent unit linked, unitised with profits or conventional with profits?

It's Conventional with Profits...

cooper2110

Before just taking the "advice" (unsure as to whether Ed is accountable for his/hers, but regularly dishes it out) of surrendering, you may wish to establish the potential for terminal bonuses that may be applicable to policies of this nature, which "may" take you significantly higher than the projections you have been given.