Another surrender advice question!

handful

Hi. After being scared with some of the recent developments with regard to terminal bonus's being slashed etc, I was advised by one of the more regular contributors to post some details of my endowments, so here goes. Four policies, the first three with Scottish Life and the fourth with NU. This element of mortgage currently on 4.49% variable. (Currently overpaying but not by enough to cover these shortfalls)

Policy 1 - Target amount £12100 - Maturity date - 05/05/2010 - Premium £19.10
Sum assured £4380 Bonus (inc SA) declared - £7166 - Surrender value £7535
Projected value in March 2008 was £8930 (£8140) @ 3.5%, £9100 @ 4.5% and £9610 (£8530) @ 7.5%

Policy 2 - Target amount £4000 - Maturity date - 01/07/2010 - Premium £6.86
Sum assured £1512 Bonus (inc SA) declared - £2330 - Surrender value £2413
Projected value in May 2008 was £2780 (£2630) @ 3.5%, £2840 @ 4.5% and £3000 (£2760) @ 7.5%

Policy 3 - Target amount £23400 - Maturity date - 04/10/2010 - Premium £35.90
Sum assured £7699 Bonus (inc SA) declared - £13911 - Surrender value £14364
Projected value in August 2008 was £16900 (£15800) @ 3.5%, £17200 @ 4.5% and £18200 (£16800) @ 7.5%

Policy 4 - Target amount £21500 - Maturity date - 28/04/2011 - Premium £48.50
Sum assured £9976 Bonus (inc SA) declared - £12770 - Surrender value £12381
Projected value in May 2008 was £16300 @ 4%, £16800 @ 5% and £17300 @ 6%

I had decided to keep them until maturity due to a number of factors, on the NU one because of a so called 'promise' payment which they have to give 3 years notice to withdraw (and haven't done for me) and also because of supposed enhanced bonus's on Scottish Life due to the transfer of business to Royal London some years ago but I have no idea how much this could be. I would really appreciate some advice or opinions on what I should do. Cheers.

EdInvestor

Please also post the maturity projections.

handful

Will do tonight, thanks EI, knew I'd forget something!

handful

EdInvestor wrote: »

Please also post the maturity projections.

Now updated to include maturity projections. Many thanks in advance.

EdInvestor

The projections need to be updated especially as these policies are so close to maturity.Please call up and get latest figures.How recent are the surrender values?Please update them too if they are old.

The new figures will give an indication if the falling values reported elsewhere apply to you too.

handful

Right, will phone them again today, I didn't realise you can ask for them at any time, I just used my last statements. The surrender values were given to me yesterday so are up to date. Thanks again for the help so far.

handful

Ok, latest maturity projections are now in red against the last figures issued last year but only on the Scottish Life policies as Norwich Union said it would take up to 20 working days to send them to me due to high volumes of cancellations!! If lots of people surrender does this mean there could be more in the 'Promise Pot' to pay to those who hang on? Thanks again in advance.

EdInvestor

handful wrote: »

Policy 1
(£8140) @ 3.5%, (£8530) @ 7.5%

If you cashed this one and used the lumpo sum to reduce the mortgage also increasing the mortgage payments by the endowment premium, your equivalent return at maturity would be 8,107, with no risk.

Policy 2 (£2630) @ 3.5%, (£2760) @ 7.5%

If you did the same with this one your return would be 2607.

Policy 3 (£15800) @ 3.5%, (£16800) @ 7.5%

And with this one the return would be 16,588.


The two smaller policies might be worth holding, though the benefit won't be that much.But policy number three should certainly be binned, the guaranteed return is almost as much as their best projection which they won't achieve.

Replace the insurance before you surrender if you need to.

handful

Thanks Ed, is it as simple as that to calculate? How do I know what terminal bonus would be and whether that would make holding on a better choice? Do you know anything about enhanced bonus due to the transfer of business to Royal London rather than give a dividend at the time?

EdInvestor

handful wrote: »

Thanks Ed, is it as simple as that to calculate? How do I know what terminal bonus would be and whether that would make holding on a better choice?

Surrender value includes current terminal bonus.Payouts are falling right across the industry and as the markets have not recovered there's a strong likelihood your policy values will be lower at maturity than they are now.

Do you know anything about enhanced bonus due to the transfer of business to Royal London rather than give a dividend at the time?

I am pretty sure they announced they were dropping that promise some years ago, due to losses in the last market crash in 2003.

handful

Thanks for the advice Ed, much appreciated.

This situation makes me so angry, I can remember that first appointment with Scot Life all those years ago after I had been advised by Abbey about the benefits of taking an endowment over a repayment and that SL were the best performing company around at that time.(What they meant was they paid the highest commission)

I even remember that they quoted a figure of £19k that I would be 'likely' to receive over and above the target amount. Despite having a failed compensation claim, I still maintain that I was aware that the size of the lump sum was variable and was subject to fluctuations but I was most definitely NOT aware that the target amount may not be reached. I thought I was being so grown up at the time choosing the 'investment' option. :mad: