Endowment policy, not linked to mortgage

rightfoot_shifter

My company is planning redundancy so I'm planning for the worst.
Is an endowment policy with life insurance element classed as savings? Would it count in the £6000 limit when claiming benefits?

cw18

They didn't count ours.

I did mention them when I was completing the forms over the phone (and again when going through things in the JC+), but they didn't even make a note of the fact we "owned" them. (We actually had 3, which combined with a DTA gave more life cover than the mortgage was -- but based on 'projected returns' were looking as if they'd only just clear the interest only side of the mortgage on maturity).

Ours weren't linked to the mortage, as the BS hadn't "staked a claim" on them. So in theory we could have cashed them in at any point.

rightfoot_shifter

That's encouraging. Do you think that was only because you had an outstanding mortgage?

One lucky break we had recently was that an inheritance paid off the mortgage early, but I decided its best to keep the endowment going if I can to maturity.

BTW I'm new here so bare with me on this.

cw18

I've no idea whether it was just because of our mortgage......


I also had one that had been started up as a savings plan totally independantly of the mortgage (intended for elder DS's 18th if he had a party, or to help with Uni costs if he went down that route), which I also declared. Can't for the life of me remember whether or not they counted that one in, but doing sums in my head quickly as to what I would have declared and the total capital they counted against us I don't think they did -- but my Unit Trust savings plan (which was meant for younger DS's 18th) was counted

Tibbledom

I think the answer is that endowment policies don’t count as capital for benefit purposes.

The exception (which doesn’t apply here) would be where “deprivation of capital” was taking place. For example somebody who knew they were about to be made redundant putting chunks of savings into policies to push themselves under the 6K/16K limits.

Certain assets are disregarded from capital for benefit purposes. For the benefits with the 6K/16K capital limits (HB, CTB, JSA, IS) the rules are pretty much the same but each is contained under the regulations for the relevant benefit.

For example under the HB regulations 2006 schedule 6 para 17 its says that the surrender value of life insurance policies is not taken into account as capital. There is also reference to this in the DWP advisers guide to CTB/HB at

http://www.dwp.gov.uk/advisers/rr2/working/06.asp

scroll down to where it says life insurance policies. You will find the wording is almost identical to that in the regulations themselves

However it doesn’t clarify what life insurance policies means. It appears that in practice this is taken to include endowment policies which include a life insurance element regardless of whether the policy is still being used to repay a mortgage – at least this seems to be the experience of earlier posters. Now it is possible that there are amendments to these regulations which clarify this or there may be cases taken to appeal where the commissioners have made a decision which has clarified this. Someone with greater knowledge might know.

I’m not an expert by the way but had to try and look it up once hence some knowledge.

edit: just to mention for the purpose of contribution based JSA (i.e. based on NI record) which is paid for 6 months (usually £60.50pw) while you are looking for work and provided you don't have pension income, all/most capital is disregarded.