friends provident endowment

cam64

need some advice please.
I've had a unit linked endowment policy with FP since 1992.
target amount £63624(april 2017).
what I might get back as of april 2008.
4% £37700
5.5% £42800
8% £52700
My fixed rate(4.94) ends in March,when I revert to variable rate,which will
be 3.5% as of 1st Feb.20 years to go on mortgage(£128000 of which £40000
is interest only).I am considering reverting whole amount to repayment &
surrendering my endowment.current surrender value £17600.
Any advice appreciated.

spuds_2

Someone with more knowledge will be along soon to give advice, but I would say you need to look at what your monthly contributions are, work out how much you will have paid by April 2017 - then decide if the possible pay-out is worth it. You are also having to guess weather the stock market will have recovered enough to grow an average of 4% a year between now and 2017.

The final bonuses on policies maturing this year have been brutally cut, as with most funds in most companies:

http://www.timesonline.co.uk/tol/money/insurance/article5485062.ece

It is impossible to guess what the bonus will be in 2017, I don't think any bonus is guaranteed - bear in mind, you could pay the £17k off the mortgage and increase your payments by whatever you were paying into the FP fund per month too.

dunstonh

its unit linked so you have access to the full internal fund range. FP funds are usually priced around 0.7% p.a. so they are low cost. Bonus rates wont apply to unit linked funds unless you happen to be in the unitised with profits fund for some or all of the money.

cam64

Thanks for replies.
For record my monthly premiums are £95.

EdInvestor

cam64 wrote: »

4% £37700
5.5% £42800
8% £52700

If you cashed in and used the lump sum to reduce the mortgage, also increasing the mortgage payment by the endowment premium amount, at maturity your return would be 33,869.

As you can see this is a lot lower than the lowest FP projection and almost 10k short on the midrate, which the policy should achieve.I would hold onto this policy, the poor value of which is reflecting the current downturn in the markets. It is likely to recover in due course.

Have another look in a year or two's time or when you are forced into a significantly higher mortgage rate (eg 5%+). By then the value may have increased significantly and the higher return might indicate it's time to make a move.

But IMHO that time is not now.

cam64

very helpful,thanks very much.

dunstonh

I would also get an IFA to review the funds (or yourself if you are able to). The FP range is good enough and offers exposures to most of the main sectors (regions of the world). Make sure you are not in the lower quality funds or you have all your eggs in one basket.

englishchrissy

Hi, please take this as a warning, anyone who has a Friends Provident endowment policy. My policy matures early March this year. It was originally for £33000 plus profits. I was told by the agent that I would get at least £40000. What I actually got was £25149. I have paid in over £13000 in the past 25 years.

Last Mar I was told I would get £29100 if I continued and £27763 if I surrendered the policy then.
So, like a mug, I struck with them and paid another year of contributions (£500). Today I get a letter congratulating me and telling me about the maturity value. Just £25149, a shortfall of over £2600 on what I could have surrendered it for last year.

So I have lost £2600 plus £500 Ive paid in contributions over the last 12 months. Add the interest I could have save if I'd used the surrender value to pay off my Mortgage last year., £27000 x 6% = £1620. So I am at least £4720 worse off than I would have been, had I surrendered last year.

Is there anything I can do about it? Friends Provident says NO!

So please readers, take my advice. Stop throwing good money after bad. Surrender your policies immediately. You will thank my for saving you money in the long run. Please tell your friends to do the same.

Thanks for your time.

dunstonh

What I actually got was £25149. I have paid in over £13000 in the past 25 years.

Thats a return of about 5% p.a. net. Not bad really. The problem wasnt so much the performance but an unreleastic target growth rate being used. Not uncommon for 1980s plans that based performance on what had been achieved in the previous 30 years.

Is there anything I can do about it?

Not a thing. You took on a decision to leave the money invested and in that period the stockmarkets went on to fall 30%. You gambled and you lost. If the stockmarket had gone up 20% then you would have gained more. You made that choice, no-one else.

Friends Provident says NO!

They are correct.

So please readers, take my advice.

I wouldnt take your advice. It isnt accurate and it gives no consumer protection if someone follows it and its wrong.

You are jumping to conclusions and assumptions without actually knowing what you are talking about and then telling others to do the same. Yet you know nothing about their policies, target growth rates, charges, timescales, investment funds, cost of replacement life cover or CI cover etc.