VR - should I surrender my NU endowment?

Peeps_2

Hi,

new to these forums so go easy on me!

Taking voluntary redundancy at the end of January.

I will have more than enough to pay off my remaining mortgage.

Should I keep paying my NU endowment premiums or cash it in?

Details :

Started Feb 1999
Matures Feb 2014
Current Surrender Value £22,268
Estimated maturity values
4% £38,700
6% £42,200
8% £46,000
Death benefit £45000
Monthly premiums £170

Thanks for any help, Peeps

EdInvestor

What interest rate are you paying on the mortgage?

Peeps_2

Hi,

fixed with Nationwide at 5.63%. Will cost me an extra 3% to pay off the £26k remaining ie £780.

Thanks

dunstonh

what is the value of your mortgage promise payment?
what is the current bonus paid?
what is the amount of the terminal bonus?
what is the market value reduction figure?

Thats assuming its with profits, if its unit linked, what investment funds are you in?

Peeps_2

dunstonh wrote: »

what is the value of your mortgage promise payment?
what is the current bonus paid?
what is the amount of the terminal bonus?
what is the market value reduction figure?

Thats assuming its with profits, if its unit linked, what investment funds are you in?

Hi, finally got some more info from NU :

Mortgage Promise payment : £3900

Current bonus attached : £4107-40 (although I think they are currently updating system with new bonuses attached)

Terminal bonus : they couldn't supply a figure for this

MVR : "there is no MVR as it's not linked to the market"

Hope that all makes sense. Thanks for any advice,

Peeps

PS the 10 year anniversary for this policy is 8/2/2009.

dunstonh

Another question, if there is no MVR then it suggests its unit linked. Can you find any mention of investment funds on your paperwork, if so, what are they?

Peeps_2

dunstonh wrote: »

Another question, if there is no MVR then it suggests its unit linked. Can you find any mention of investment funds on your paperwork, if so, what are they?

Hi, no mention of investment funds.

To be honest I'm not 100% sure that the NU person I was speaking to was 100% sure what she was talking about when I asked her the question re MVR.

I must admit I'm leaning towards surrendering it to pay off the mortgage and then invest my redundancy.

Seems sensible to wait for the reattribution but they seem to be stringing us along.

Cheers, Peeps

dunstonh

The endowment is actually on target (it would probably had a 7% target growth rate. Maybe 6%) but with the 6% just below and the 8% just above and NU quite capable of those figures, then its not doing too badly at all. Plus, you have have the mortgage promise value.

So, whilst future returns are unknown, and wont know what option was best until maturity, I would be inclined to hold on to it. At least until your fixed rate is finished. You are on a low rate, the endowment has the potential to exceed that rate and there seems little point paying 3% to get out at this time.

In addition to this, the endowment is providing life cover (possibly CI cover as well) and its making more than cash savings at this time. So, depending on your cash savings amounts, you may feel its worth keeping from that point of view.

Peeps_2

dunstonh wrote: »

The endowment is actually on target (it would probably had a 7% target growth rate. Maybe 6%) but with the 6% just below and the 8% just above and NU quite capable of those figures, then its not doing too badly at all. Plus, you have have the mortgage promise value.

So, whilst future returns are unknown, and wont know what option was best until maturity, I would be inclined to hold on to it. At least until your fixed rate is finished. You are on a low rate, the endowment has the potential to exceed that rate and there seems little point paying 3% to get out at this time.

In addition to this, the endowment is providing life cover (possibly CI cover as well) and its making more than cash savings at this time. So, depending on your cash savings amounts, you may feel its worth keeping from that point of view.

Thanks for advice.

So, basically I should pay £140 a month for mortgage and £170 a month for another 5 years out of my redundancy rather than pay off my mortgage now?

I thought paying my mortgage off now was a no-brainer whilst interest rates for savings are so low, or do you think they will increase soon?

Sorry for all the questions and thanks for advising me.

Peeps

dunstonh

So, basically I should pay £140 a month for mortgage and £170 a month for another 5 years out of my redundancy rather than pay off my mortgage now?

Up to you. Its a judgement call. The endomwent is capable of beating the mortgage rate you are paying but its also capable of not doing it.

If you surrender, you lose the mortgage promise and suffer a surrender penalty and possibly an MVR. Plus you pay a 3% penalty on the mortgage. So, the costs in doing what you want to do at this time could be very high but cheaper to do so in the future.

I thought paying my mortgage off now was a no-brainer whilst interest rates for savings are so low, or do you think they will increase soon?

You are not in savings though. You are in an investment and investments zig zag and have periods that are good and bad. We have just come off a period of bad. Ideally, not the best time to be pulling out and historically the best time to be buying for the long term. Problem is that there is no crystal ball to say which will be best. All we have is potential. If it was a rubbish endowment, the decision would be easy but its not a rubbish endowment. Its more or less on target and has a promise value to top it up if it doesnt.