Should I keep my endowment?

bank_of_slate

Hi guys,

My husband and I have had this policy since Dec 1996.
We have since moved house and now have a repayment mortage on it.
We kept the endowment going as we had already paid 8 years of it and didn't know what else to do with it.
I would really appreciate some advice on what to do with this...
(I think I might look to change it after we get our shares once the company is de-mutualised)

Standard Life with profits endowment...

Monthly payment £47.96 - £14,307 over the term
Target amount - £29,928.00

plan value at 15.12.05 - £6,194.37

fund value....... 3,008.956 units @ 203.2p each = £6,114.16

plan might be worth..

low rate - £16,600
intermediate rate - £20,100.00
high rate - £ 24,400.00

I would really appreciate some advice about how our money could be better invested!
...Linda xx

EdInvestor

Hi Linda

There's not much point in doing this now because of the upcoming windfall, of course.

Does this policy have a Guaranteed sum assured and declared bonuses?If so, please post them. Whether it does or not, post the surrender value (ring up and ask).Then we can give you an idea, not that it's worth much at this point .

Threadhead

We are in a similar position.... and then some (as we have TWO standard life endowment policies). I was all for cashing them in and starting a repayment mortgage a couple of years ago, but OH, who has "slight" insider knowledge, was keen to keep the policies until the demutualisation. Obviously he was right, and I was wrong! (although unfortuately both policies have his name first, so we only get one windfall - if anyone knows different, please let us know)

Anyway, since we are currently paying about £125/month over the two policies, it is a bit of a killer that we know the policies are so far off track. Someone suggested to us that we could contact Standard life and see if we could reduce our monthly payments to, say, £10 each policy/month. Anyone have any experience of this?

InMyDreams

Threadhead wrote:

Someone suggested to us that we could contact Standard life and see if we could reduce our monthly payments to, say, £10 each policy/month. Anyone have any experience of this?

We were in exactly this position too. (Had an endowment with first house, but when we moved, we switched to repayment but kept up the endowment in addition as a saving, constantly debating what to do with it.) Within the year the extra payments were crippling us, so forced to do something, we reduced the endowment premiums to the minimum which was £15. At this point we also realised that a substantial part of our original premiums were life insurance and payment protection type fees that had been because it was aiming to pay off a mortgage, but were now at best unnecessary, and at worst duplicated with our life insurance for the new mortgage! Anyway, the result was that we reduced the payments, removing all but the minimum service charges at the same time, and it cost us units to the (then) value of £30 to do this. Given that this was less than the units being sapped away *each month* for all the extra fees and insurances we were still paying on the much larger premium, it didn't seem like a lot to pay.

We had to sign a whole new load of paperwork, but was really very easy.

IMD.

edited to add that this wasn't with Standard Life, but thought my experience might be of use anyway.

EdInvestor

Threadhead wrote:

...although unfortuately both policies have his name first, so we only get one windfall - if anyone knows different, please let us know..

Windfalls come in two bits - the flat rate (usually 500 quid) and the variable rate ( a percentage of the value of your policy(s) and the length of time you have had them).

So although you will miss on out one flat rate payment, your variable rate ( which is usually much the biggest part) should reflect the value of both policies

You could have switched the names around to get two flat rate payments as well a few months ago, but it's too late now.

I wouldn't fiddle with the policies until after the DM, it's only 6 months off now.Review them after that.

bank_of_slate

Just telephoned Standard Life to see if I can remove the life cover and critical illness from the policy as it is no longer required to protect our mortgage.

The woman said that it was an integral part of the plan and I don't have the option to remove them.

Does this sound like they're fobbing me off?
...Linda xx

dunstonh

bank_of_slate_and_nazi wrote:

Just telephoned Standard Life to see if I can remove the life cover and critical illness from the policy as it is no longer required to protect our mortgage.

The woman said that it was an integral part of the plan and I don't have the option to remove them.

Does this sound like they're fobbing me off?
...Linda xx

No. Not all providers allow amendments.

St Life have been known to do it in the early years in the past but that usually meant re-issuing the plan. They no longer offer endowments so its possible that they cannot re-issue plans. Only guessing though.

Also, any change that they would allow would change the qualifying status of the policy and could invoke a tax penalty.

darktrader

These calculations are really very simple. Here's what to do...

1. Do NOTHING till you get the windfall.
2. Calculate the "profit" from the endowment if it's left to term. (How much you're paying in for the FULL term compared with the estimate of what you'll receive. I assumed the mid-estimate on mine but you might prefer the lowest. With your figures the lowest looks like rubbish return.
3. Obtain a surrender value
4. With the surrender value see what you would get if you sold it.

Armed with all the figures make an informed decision. And IF it's surrender/sell then remember the loss of life insurance - you might need to make alternative arrangements.

And IF its surrender/sell the BEST investment you can make is this...

Whatever money you get back, add to the value of any windfall you get and PAY IT OFF the mortgage. Then round up the £47.96 you're paying into the endowment to 50 quid and make a monthly over payment on your mortgage. (If you have a tie in put the monies into a high interest cash account till the tie-in ends then pay it all off when you remortgage.

(Personally, I kept all three of my endowments running because that's what the "figures said." Though my mortgage will be paid off before the first one matures.)

dunstonh

There may be other options with SL after DM. They have suggested they will allow penalty free switches into other funds with greater potential.