Endowment Help - Which Option?

Jule$

I am hoping that someone may be able to help me!

I have just received a letter from my endowment company upholding my claim against them, but they have given me 3 options and am not sure which to go for.

Option 1 - Enhance my policy by £1373.17 (which is the compensation offered), however they do go on to say that there may still be a shortfall if I do this.

Option 2 - Pay me a lump sum of £1373.17 to invest as I wish or reduce the outstanding balance (their words, not mine).

Option 3 - Surrender the policy and get a surrender value of £10,075.47 plus the lump sum payment of £1373.17. I presume this option would mean converting to a repayment.

According to their calculations I have paid £9,865.72 to date, not a great investment for 16 years! I have made £209.75 and the surrender value is way higher than last years policy value which if I remember was only about £6500.

I currently pay £64.34 per month into this and have another 110 months (9 years 2 mths) to pay on it.

It was supposed to be worth £22,150 at the end of the mortgage (my mortgage is only small at £19828 and a small Home Improvement Loan of £2228) but I do also have a secured loan.

I am tempted to cash it in and convert to a repayment and use the capital to clear my secured loan 1st and then over pay on the mortgage but am not really sure if this is the way to go.
Or do I carry on paying as there isn't long to go on it?

I would be grateful for any input any of you have.

Many Thanks
Jules

Little_Miss_Winner

Hi,

I havent got the foggiest about mortgages/endowments, but if it were me, heres what I would do.

"Take Option 3 - Surrender the policy and get a surrender value of £10,075.47 plus the lump sum payment of £1373.17. I presume this option would mean converting to a repayment."

If you do not really need this money to pay other debtors i would pay off the total amount of mortgage, bringing the amount down to; £10,608.

The if you keep paying your usual payments and endowment money to new repayment mortgage say; I worked out approx £314 a month.

You will be MORTGAGE-FREE in 34 months. (APRIL 2009)

Obviously this is only what i would do, I don't know your situation or whther this lump sum is planned for something else, or other debts that have higher aprs etc.

Good Luck
pot

dunstonh

According to their calculations I have paid £9,865.72 to date, not a great investment for 16 years!

It may not be as bad as you realise. If its unit linked, then that sort of performance after a stockmarket crash would be expected.

The biggest problem with endowment complaints is that consumers do not know enough about the product (which many wouldnt have purchased had they known). However, they are now entering another decision point on what to do and assume that the endowment is performing badly.

Many very good endowments have been surrendered because of not understanding how they work. Many rubbish ones are being kept too because of an assumption that they may come right.

You need to know if the endowment is good or bad and the performance rates just after a stockmarket crash is not a good enough judgement by itself. The charges, fund(s), options, features all need to be considered.

I am tempted to cash it in and convert to a repayment and use the capital to clear my secured loan 1st and then over pay on the mortgage but am not really sure if this is the way to go.

Temptation is good. That is the risk free option and this is the point where you can do it without losing out financially.

Or do I carry on paying as there isn't long to go on it?

If its a good endowment with good investment funds and good potential ,then maybe. It may have future penalty free exit points which may be worth waiting for. Or it could be the worst endowment ever and it will never improve no matter how long you wait.

We cannot give you a yes or no answer as to whether its best or not as we know nothing about your policy.

Little_Miss_Winner

Many very good endowments have been surrendered because of not understanding how they work. Many rubbish ones are being kept too because of an assumption that they may come right.

Hi Dunstonh.

I know you are a financial advisor, but how do we joe public find out about the above?

I have tried in the past to read lots of financial type press, but it makes my mind boggle, thus usually giving up after 10 minutes.

I am not asking for lists of bad and good, and I know that you probably earn a very good living from your expertise. That's why YOUR the financial advisor, and I aint.

What I am asking is apart from this website, which newspapers are the best to keep us ahead of the 'markets', or are they much the same, and the trick is to remember it all?

The minute I hear - apr, %, ftse etc....... I feel all nauseous! _pale_

cheers
pot

Jule$

Thanks for the replies.
I think a trip to an Independent Finacial Adviser is in order.

I do know that the policy is unit linked, but thats as far as my knowledge on that goes so I will have to talk to someone before I make the decision.

I really want to do this right, not just because I see £'ss rolling.

Thanks again
Jules

Antj87

potogold wrote:

Hi,

I havent got the foggiest about mortgages/endowments, but if it were me, heres what I would do.

"Take Option 3 - Surrender the policy and get a surrender value of £10,075.47 plus the lump sum payment of £1373.17. I presume this option would mean converting to a repayment."

i agree here as its what the financial ombudsmon recommended to my family

The financial ombudsmon sorted out my family endowmwnt short fall in weeks free of charge.
Antj87

dunstonh

Hi Dunstonh.

I know you are a financial advisor, but how do we joe public find out about the above?

I have tried in the past to read lots of financial type press, but it makes my mind boggle, thus usually giving up after 10 minutes.

I am not asking for lists of bad and good, and I know that you probably earn a very good living from your expertise. That's why YOUR the financial advisor, and I aint.

It is either a case of getting a decent IFA to do it. Or being prepared to learn about it yourself. I do say decent IFA because many would not be interested in helping you. A salesforce IFA is less likely to help you than a local small IFA.

The very basics you need to find out are:
1 - Projections - they give an indication of performance if X% is achieved. X% may or may not be realistic but its the starting point.
2 - Current value and surrender value
3 - Are there points in the policy where there are no surrender penalties? - some have no exit penalty after the 10th of 15th. If you leave in year 14 you may face a 10% penalty, by waiting until year 15, you may avoid that penalty saving yourself 10% of the current value.
4 - What funds are you invested in and what alternative funds are available
5 - Breakdown of policy charges and features. This would show if there are increased allocation rates in future or if the explicit charges are so high that it would eat up a lot of the performance and make it harder to hit target.
6 - What are the protection options included. Need to check if waiver of premium and critical illness are built in as it may be cheaper/better to keep the plan with the old critical illness (CI) benefits rather take out a new pure protection plan with the lower level of CI benefits. or if the premium isnt that much different, keep the endowment.

What I am asking is apart from this website, which newspapers are the best to keep us ahead of the 'markets', or are they much the same, and the trick is to remember it all?

Once you have the information on the funds, you can look them up. http://www.trustnet.co.uk/life/ Trustnet, like other internet sources, is not as detailed as the tools available to IFAs (that pay for the software) but its a good starting point.

As an endowment is an investment product, it should be treated like one and funds selected in the same way an investment portfolio would be. If the provider allows 5 funds to be selected, then pick 5 and spread it across them. Never put your eggs into one basket.

Now, if you think that is too much for you to do and understand and you don't have the time to learn about it yourself, then get an IFA to look it. The IFA will take a written authority and send it to the provider and ask all the questions above plus a few more. They can then review and report to you.

i agree here as its what the financial ombudsmon recommended to my family

The financial ombudsmon sorted out my family endowmwnt short fall in weeks free of charge.
Antj87

Are you sure? The ombudsman doesn't give financial advice and wouldn't be in the position to know the key facts about the endowment policy to tell you whether its a good one or not.