ScotAm/Pru Unit linked endowment

Misstique

Hello all

I understand that former Scottish Amicable now Prudential policies generally perform well. I have a unit linked policy which I no longer need for my mortgage and am using as a saving vehicle.

Just looking for general views about whether or not its worth keeping from the endowment gurus out there.

I have just received an amber alert plan update indicating the following:

Start date 1993
Maturity date 2018
Current monthly premium £70.30
Target amount £51700

Maturity illustrations

38200 @ 4%
£44700 @ 6%
52300 @ 8%

Many thanks in advance

EdInvestor

Misstique wrote: »

I understand that former Scottish Amicable now Prudential policies generally perform well.

This refers to their WP policies, not the unit linked ones.

Whether or not you keep this one really depends on how you see the markets over the next few years. For pure savings you might be better to cash it in and reinvest in a tax free stocks and shares ISA, choosing some more more exciting funds. Then at least you wouldn't pay tax on your gains as you do in the endowment.

Misstique

Thanks very much for the response EdInvestor. I did not know the policy was liable to tax is it because its unit linked?

dunstonh

Whilst Ed is correct that the taxation is better (slightly) in an ISA, the charges are likely to be higher in an ISA as well and very often the charges difference is more than the tax saved.

Pru unit linked funds though are not that good. They have a very good with profits fund but on the unit linked side they are almost completely sub standard across the board. So, paying more for better quality is certainly a valid option.

Misstique

Thanks Dunston for your response. I'm really not sure what to do, I have other funds invested or allocated for future share based ISas this fund is just sitting there in limbo and my other funds will take me to the limit of the new ISA share limit for the new financial year.

Just not sure if I should leave it and wait for market to pick up before selling or cash in now.

This tax issue Ed mentioned above has put a spanner in the works for me, I wasn't aware of the tax implications before.

dunstonh

Tax is within the fund. Its not additional. Its only upto 20% of the growth (with indexation and not all assets being chargeable it tends to be closer to 10% in real terms). It can make a difference of about 1% a year at around 6% p.a. return depending on the asset class (more if its all equity, less if its all fixed interest)

EdInvestor

dunstonh wrote: »

It can make a difference of about 1% a year at around 6% p.a. return depending on the asset class (more if its all equity, less if its all fixed interest)

So you are paying more than double the charges, very bad.

You could of course just cash in the policy and invest directly in funds using a discount broker such as https://www.h-l.co.uk. If you choose equity funds, you won't pay tax as you have an annual tax free CGT allowance of more than 9k.

Misstique

Thank you both for your responses. I've been burnt by my share investments (as have many others) and am not that savvy with shares etc. I have a small portfolio using Best Investment managed portfolio service but really don't have confidence in how best to approach this.

Will dwell on it but thankyou both very much.