Endowments - Trouble ahead!

Gorgeous_George

Just when you thought it couldn't get any worse.

In brief, endowments are maturing en masse just as the credit crunch takes effect. The insurers are slashing final bonuses and people will be getting less than they could have received had tey cashed in early.

BBC Link

I think the insurers have borrowed from later investors to pay current policies - just like the Madoff scam. Last one out, turn off the light

GG

foreversummer

Jolly glad I got rid of all three of mine five years ago and paid down the mortgage.

My first would be maturing in April next year, the second in 2010 and the third in 2015. No regrets!

Foreversummer

Kez100

What about policies with guarantees?

Geenie

Ours has just matured. Taken out to cover £36,000, we have paid £14,450 into the endowment over the 25 years, and we got a final cheque for £40,000. Seems pretty good to us!

Not sure how much we would have made on £48 a month over the same period going into a savings account? but so glad we didn't panic and cash it in due to the predictions we were getting over the years.

feisty1

Geenie? Was this a Pru policy? Oh & well done by the way

dunstonh

Not sure how much we would have made on £48 a month over the same period going into a savings account?

Almost certainly a lot less. That £48 covered life cover and it also had tax relief on the premium. it would have been one of the last to do so. The target growth rates from that period were typically double digits.

You also benefitted from lower monthly payments (endowment mortgages were usually cheaper than repayment and that was a common reason for doing them) and had extra MIRAS when that was around.

So, well done.

Gorgeous_George

When I first took out a mortgage I was charged 0.5% (or 1%, I'm not sure) extra because I had an endowment. At the peak I was paying 16.5% albeit on a £24K mortgage.

That was with Birmingham and Bridgewater Building Society.

GG

dunstonh

That was with Birmingham and Bridgewater Building Society.

And where are they now? That business model of theirs must have worked

Most lenders didnt differentiate in the rate between interest only and capital and interest (at least not in my lifetime ).

Geenie

feisty1 wrote: »

Geenie? Was this a Pru policy? Oh & well done by the way

It was a Scottish Provident policy Feisty, and many thanks to everyone for the well dones. We realise we have been very fortunate, as wasn't expecting this amount at all! Infact didn't expect to reach the £30,000's going by the predictions in the past for Endowments and blips in the stock market during the 90's etc! :eek:

I just wanted to show that we weren't mis sold this policy when we took it out in 1983 by the professional advice given at that time, as financial people come in for a lot of stick and blame when things fail, or appear like they may, but don't get the praise when their advice has been spot on. It had always been made clear to us from the start that nothing was guaranteed in the final payment, but it would hopefully do a lot better over 25 years then putting the same money into a savings account.

As dunstonh has stated, we were just in time to get tax relief and avoid paying tax on the final amount, which would have dented the final payout for sure.

I am not saying this will be as good for everyone else, just wanted to say that our experience of an Endowment has been very positive, and it could well be the same for others if they can hold their nerve long term, and experts think it is not all doom and gloom! It is all a gamble in the end for sure, and the very best of luck to everyone else still holding one and awaiting payment.

payless

dunstonh wrote: »

And where are they now? That business model of theirs must have worked

Most lenders didnt differentiate in the rate between interest only and capital and interest (at least not in my lifetime ).

The bank I worked at in the mid 80's did

clairehi

Geenie wrote: »

just wanted to say that our experience of an Endowment has been very positive, and it could well be the same for others if they can hold their nerve long term, and .

not sure whether this works for anyone taking out an endowment more erecently though as

"we were just in time to get tax relief and avoid paying tax on the final amount, which would have dented the final payout for sure."