How do I decide whether to cash in my endowment?

JollyNolly

Well, that's about it - I have a miss-sold mortgage (still trying to claim) - should have been worth 40K in 7 years time, but its current value is more like 16K. I don't understand a thing about how endowments work. It's Norwich Union, With Profits, I think. Can someone help me decide?

homer_j_3

The basics of this is to work out whether you cashing now and investing can provide a biggger return than leaving where it is.

I think you just need to gove some basic details of who the endowment is, how long you have had it , what the current surrender value is

If you can get this info, we should be able to give you a clue to whether it is worth continuing or bailing..

just to add that if you could mention monthly payment and any guaranteed sums assured on the policy. It would also be helpful to know what rates have been used to acquire the 40k figure... Its late and im tired..

dunstonh

An NU endowment is unlikely to have that much of a shortfall if it is due in 7 years time (10-15 year plans possible but not ones longer than that). I wonder if you are mis-reading the information being supplied.

jayne26

hang in with claim we got a few thousand after many letters, we put money in bank and ive just cashed endowment in and put the money together and paid off half morgage. i have switched to to repayment and taken a few years of the term and feel alot happier to know that on a set day i will be morgage free. paying the cash off your morgage may find you paying the same ish monthly fee without the worry.get the figures of endowment company,ring round for quotes and do the maths and if you get mis selling money " DONT SPEND IT" run to the bank as fast as you can :T :T

EdInvestor

Hi JN

Post the following info and we can take a view:

Guaranteed sum assured
Declared bonuses
Surrender value (ring up and ask)
Monthly premium
Maturity date

JollyNolly

Sorry, I didn't make it clear - I have 7 years left on a 25 year endowment - so I presume from what dunstonh says I'm probably best off out of it. I gave up hoping that it would pay off my mortgage several years back and took up a repayment mortgage instead, but kept up the premium payments on the endowment. I will get the details that EdInvestor has suggested and post them tomorrow. Quite agree with jayne26 - if I ever get anything back from my claim it's going straight into the building soc to help pay off my mortgage.

lynn100

Can you please advise of any worthy companies who I could sell me endowments to, which might bring me possible more money thant the current surrender value?

lynn100

Hi, do you have any information on worthy companies that purchase endowments. As I have 2 to sell and am hoping to get more than the current surrender value.

Look forward to your kind reply.

silvercar

Search for TEPs (traded endowment policies) on google.

JollyNolly

Okay - here's my info:

Guaranteed sum assured - £13,760
Declared bonuses - £8,204.70
Surrender value - £16,733
Monthly premium - £55.60
Maturity date - 24th Feb 2013

What does that tell me?

My interpretation is that if I carry on paying £55.60 a month until 2013, I will be guaranteed a payout of £13,760 + £8,204 = 21,964. However, if I were to cash it in, I'd get £16,733 now. Taking into consideration the £55.60, that means that if I put the £16,733 under a mattress and added the £55.60 to it every month instead of paying it to the Norwich Union, I'd have £16,733 plus 12 x 7 x 55.60 (4670) = £21,403, i.e. about £500 less. So assuming I was bright enough to put it into savings rather than under the mattress, I could expect to end up with more than the NU would pay out in 7 years time. Have I got that about right?

EdInvestor

Have I got that about right?

Yep. All you've missed out is the miracle of compound interest on the savings which would mean you'd end up with 27,345 instead of the 21-22k otherwise available

This is a big gap for even an NU endowment to bridge ( perhaps it's in one of the old funds from the CU/GA days?).The bottom line in any case is always, why take the risk for what could easily be much less than a guaranteed cash return?

As jayne says, you can further boost the guaranteed return, assuming you are paying more than 4% interest on your mortgage, by scooting down to the BS with the surrender money and paying part of it off - but check on redemption penalties first in case it would be more sensible to wait.