Standard Life Homeplan -surrender as red risk??

jenniferfluff29

Hi there

Could anybody provide some advice on whether it would be advisable to surrender this policy:

Provider: Standard Life - Homeplan with profits
Guaranteed sum assured: don't think there is any
Declared bonuses: don't see any mention of bonuses on statement
Surrender value: 10,743.24 at 17/11/08
Monthly premium: 67.50 (includes £6.32 for critical ill/life & £0.78 waiver of premium payment
Maturity date: 17 November 2020
Maturity forecasts: 4% - 23,600 6% - 28,100 8% - 33,400
Will buy this year with hopefully 5yr fixed rate at 4.99% on £100,000 mortgage with 20,000 interest only and 80000 repayment (if I keep this plan).

Additional info:-

- Would cost £23 per month to obtain critical illness/life ins for this amount over a 12 year period.

- MEP Standard Life stated in my latest statement "However, we think it is unlikely that you will receive any MEP payment. This is because, in general, it seems unlikely that MEP plans will pass the 6% a year test." - not sure what this means.

- The policy is split into about 6 or 8 different policy numbers. I think I may therefore be able to sell each policy individually, therefore could surrender part of the policy if advantageous (if I am reading my paperwork correctly-which I am possibly not)

If it would be more advantageous to cash in this policy, should I put the full amount into my mortgage to reduce it?

Any help greatly appreciated.

EdInvestor

jenniferfluff29 wrote: »

- MEP Standard Life stated in my latest statement "However, we think it is unlikely that you will receive any MEP payment. This is because, in general, it seems unlikely that MEP plans will pass the 6% a year test."

It seems they are admitting that their endowment promise is a dud because the WP fund will not reach the average 6% return required.

Do you have a mortgage at present, if so what interest rate are you paying?

jenniferfluff29

Hi there

I will have a mortgage again in around the next 6months. Hopefully I may be able to pick up a 5 year fixed deal at 4.99%.

If I keep the endowment I will look at 80000 on repayment and 20000 on interest only (to be covered by SL endowment & saving at a later date) over 16 years.

If I surrender the policy I would take the £10000 surrender value and reduce my mortgage to 90000 repayment.

Until I get my mortgage, I will put the £10K into my HBOS guaranteed saver reward account (4.8%net) fixed for one year. If I get the house that I like in April, then the £10k will got towards it.

Thanks for looking at this for me. I think that I would be better off surrendering it but not sure.

Met_Bobby

Ask the same adviser who will arrange the life cover and CIC. They will be able to explain the numbers behind the Homeplan in 10 minutes without difficulty for you. (If you are using a qualified IFA that is). It will save you a lot of money if you do.

EdInvestor

jenniferfluff29 wrote: »

Maturity forecasts: 4% - 23,600 6% - 28,100 8% - 33,400

If you cashed in and devoted all the money towards house purcahase/savings at an average return of 4.9% to maturity you would get 29,852 which is ahead of SL's forecast @6% growth (which they have admitted they will not reach), but with no risk.

I would dump this policy and proceed as you have outlined.

jenniferfluff29

Thanks Ed

Are Standard Life within their rights to not honour the MEP? I can't see what purpose it serves.

Do you know if Standard Life will have reduced my surrender value since my last valuation on 17 November (saw on another post that they possibly have), I will be checking with them anyway.

Also, can you get more for your endowment if you sell it to a 3rd party and can you recommend any good websites?

Thanks again for all your help and time looking at this for me.

EdInvestor

jenniferfluff29 wrote: »

Thanks Ed

Are Standard Life within their rights to not honour the MEP? I can't see what purpose it serves.

Yes.It's based on the fund returning an average of 6% pa. which it obviously isn't at present.

.

Do you know if Standard Life will have reduced my surrender value since my last valuation on 17 November (saw on another post that they possibly have), I will be checking with them anyway.

They may have reduced it twice I'm afraid

Also, can you get more for your endowment if you sell it to a 3rd party and can you recommend any good websites?

Sometimes. Try here: www.apmm.org

jenniferfluff29

Ed

Thanks for all your help

Forever_Red

Originally Posted by jenniferfluff29
Are Standard Life within their rights to not honour the MEP? I can't see what purpose it serves.

EdInvestor wrote: »

Yes.It's based on the fund returning an average of 6% pa. which it obviously isn't at present.

I thought someone posted on here that SL had put the money aside for the Mortgage Promise and they would only not pay it, if the endowment had met its target.

Alan

dunstonh

I thought someone posted on here that SL had put the money aside for the Mortgage Promise and they would only not pay it, if the endowment had met its target.

Std Life have said that the full liability for the promise is funded for should it be needed. The promise value is not one value either. Its a value range dependent on growth and shortfall.

Forever_Red

So if I had a Mortgage Promise estimated between £2,360 and £3,541 in 2007, is this guide range likely to change or will they payout somewhere in the region of these two figures when the plan matures?

Alan