Zurich / Eagle Star Endowment. What to do?

morrisoscar

We have an endowment plan which we on longer need to pay off our mortgage. It was due to cover £22,200.00 by November 2019. It is called a Star Homebuyer and was taken out with Eagle Star in January 1994.

We have a letter from Zurich giving us the projections.

4% £13800
6% £15500
8% £17800
Surrender value £7517.00

The monthly premium is £31.83 and the investment is split
50% Managed Fund
50% With Profits Fund
We tried a site recommended by Zurich which buy policies but it came back with no better offers.
Question is which is the best thing to do.

1) Cash in the policy and put the lump sum and monthly premium in a savings account.

2) Keep paying the policy.

Any advice would be appreciated.

EdInvestor

What rate of return do you expect you could get for the money if you surrendered it? If you still have a mortgage (even if not attached to the policy) please post the interest rate you are paying.

dunstonh

We tried a site recommended by Zurich which buy policies but it came back with no better offers.

Misinformation from Zurich. You cant sell unit linked endowments.

The unit linked side may not be too bad. Eagle Star used to be reasonable on charges and some of the funds were quite good. If you can switch the 50% WP into unit linked (which you probably can) then keeping it but running it as an investment could be a good option. Although it would need to be costed against modern alternatives, like S&S ISAs.

morrisoscar

EdInvestor wrote: »

What rate of return do you expect you could get for the money if you surrendered it? If you still have a mortgage (even if not attached to the policy) please post the interest rate you are paying.

Thanks EdInvestor,

No idea about rate of return, particularly in the current market. We have a £50k interest only tracker mortgage at 2.24% with Nationwide at present. The deal we have ends in October and we over pay the maximum (£500) allowed each month. We are going to pay it off in October with money we will receive from an endowment which matures this month. If we pay it off prior to October the penalties are quite high so I think we will buy a 9 month bond with the money. This is the reason that our Zurich/Eagle Star endowment is surplus to requirements.

dunstonh

No idea about rate of return, particularly in the current market.

Forget current market conditions. That isnt how investments work. For example, markets are up 20% in the last month or so. That isnt what you are normally going to get. Just as when they dropped 40% that isnt normal either. You average out the good and the bad years and look at the potential and what you would expect from the investments. Its a judgement call but you generally have an idea of the range that a long term investment has the potential to obtain as an average. Even if its more than that one period or a less.

morrisoscar

dunstonh wrote: »

Forget current market conditions.

Thanks dunstonh,

Zurich project growth of 3.75% for the with profits element and 6% for the unit link funds. EdIvestor was asking me about expected returns if we surrender the policy and put the money in a savings account, Would 4% be a reasonable assumption in the long term if we surrendered the policy.

EdInvestor

morrisoscar wrote: »

Zurich project growth of 3.75% for the with profits element and 6% for the unit link funds. EdIvestor was asking me about expected returns if we surrender the policy and put the money in a savings account

If you want to duplicate the investment risk but in an ISA you can add 1% to the returns due to not having to pay tax and lower charges.So if you stuck half in a cash ISA long term and the other half in the S&S ISA in equity funds then an overall long term return of 6% would be reasonable IMHO.