Pru Endowment"advice please"

koekaye

Advise for a moneysaving dunce

Currently have a Scottish Amicable endowment (Prudential) taken out to repay £26,000 interest only mortgage

Surrender Value £23,800 followed by projected values as follows

4% £25,300
6% £25,600
8% £26,000

Paid up value £16,504 Costs £89.20 per month Matures 21st Oct 2009
Mortgage payments £106

Given the present state of the economy would it be wise to cash this in now?? and make up difference from our savings account, Have mortgage on 4.9% savings account giving 5% (high interest account) also would there be any charges to the surrender value ie penalties fees etc,

I am assuming that the 4% rate may well not be achievable and that the £238000 may only decrease so cut and run

Your thoughts and advise would be appreciated

Thanks in advance

dunstonh

Given the present state of the economy would it be wise to cash this in now??

No. It would have been wide to cash it in 18 months ago. Now you are selling at what appears to be near the bottom of the market.

When you look at those figures you have to say that this one looks more than capable of coming in with a surplus. Not a surprise as most Scot Am ones do.

koekaye

Thank you for that, yes 12 months ago was worth more but just a bit too keen to have rid of my morgtage even tho its only small,am getting jittery about it losing big amounts of cash, may be best to hang on and await outcome.

EdInvestor

The maturity value of this policy is likely to be lower than the surrender value now, as all WP endowments are on a declining trend.Thus the likelihood is you will waste your remaining payments.I would surrender now and pay off the mortgage..

dunstonh

Scot Am have the second best success rate on hitting target (over 90%). First is Pru. Pru went defensive on their funds before the crash and avoided a lot of the downturn that others didnt. They have an excellent record through past market crashes and recessions.

I would keep it.

EdInvestor

If the OP surrenders the policy now and uses the lump sum to reduce the mortgage also increasing the mortgage payment by the amount of the endowment premium to maturity, she will end up with 25,907, which is less than 100 quid from the target with no risk.

This is what the Pru projects to get at these growth rates:

4% £25,300
6% £25,600
8% £26,000

Yet it may well have a zero or negative growth rate over the next 9 months, in which case it will most certainly miss the target.

In any case the surrender option beats all the projections except the highest one, which is very unlikely to be met..

Why take the risk?.