How do I decide whether to cash in my endowment?

JollyNolly

Or even by paying off a rather large loan I have that calls for 7.9%???

JollyNolly

Also, itn't it possible that I would get more than the guaranteed sum in 2013, or is it unlikely?

EdInvestor

Or even by paying off a rather large loan I have that calls for 7.9%???

Yes indeed.

Also, isn't it possible that I would get more than the guaranteed sum in 2013, or is it unlikely?

This is the (unguaranteed) terminal bonus you're referring to here.These used to be large on endowments ( hence all the stuff about paying off the mortgage and having enough left over for a car/boat cruise,, etc.) As we know, now they are very small, often non-existent and the endowment can't even repay the mortgage

As I said before, also referring to the possible TB:

This is a big gap ( 5-6k) for even an NU endowment to bridge.

IMHO it's very unlikely even the open NU fund (which I suspect is not the one you are in) will be able to produce an annual 8% to match that loan, but in any case, why take the risk when you can obtain a guaranteed return that is likely to be higher?

JollyNolly

Sorry to show my total ignorance on this once again, but does this mean that the "declared bonus" could be much less even that what they are telling me, by the time the policy matures?

JollyNolly

In the middle of trying to decide what to do with my endowment, I've just heard that I have successfully claimed for misselling!! In fact, I would almost certainly be jumping up and down at this moment if only I could understand what the letter said! I think it's telling me that I will get the difference between my outstanding mortgage repayments and the surrender value of the endowment - is this likely to be right?

My endowment was originally intended to pay off my £40K mortgage. Now it's projected to pay off £22K-ish (see above). However, in the letter they tell me "your net financial loss to date is £9315" - can that be right? The way I see it, I'm short of more like £13K.

As ever, any help will be very gratefully received.

JollyNolly

I've just re-read my letter. It looks like all they're offering me is any redemption penalty I incur if I use my endowment to reduce the balance of my repayment mortgage, i.e. a few hundred pounds, tops :mad:

EdInvestor

JollyNolly wrote:

Sorry to show my total ignorance on this once again, but does this mean that the "declared bonus" could be much less even that what they are telling me, by the time the policy matures?

At maturity, assuming you have contiinued to pay in the premiums, they will pay you at minimum the "guaranteed value" which consists of the guaranteed sum assured plus the accumulated declared bonuses. On top of that there might be a terminal bonus but this is not guaranteed.

Re compo, it's based on putting you in the same position you would be in if you had taken out a repayment mortgage.It's not designed to make up any shortfall.

The calculations assume you will surrender the endowment, use the proceeds plus any compo money to reduce the loan amount, and increase the mortgage payment by the amount of the endowment premium.

This may not do the trick: if it doesn't, it means that you have had a cheap deal with the endowment, compared with what you would have paid out with a repayment mortgage.

JollyNolly

But if the compensation just covers any redemption penalty, it's only going to be a few hundred, surely. It seems so pathetic in comparison with the promised payout. Is this what everyone gets? I thought people were getting four-figure compensation...??

dunstonh

But if the compensation just covers any redemption penalty, it's only going to be a few hundred, surely. It seems so pathetic in comparison with the promised payout.

It means that financially you are only a little worse off than you would have been had you gone with a repayment mortgage now.

If you surrender the plan, take the compensation and pay that into the mortgage and switch to repayment, then you will be in the correct position.

Is this what everyone gets?

Unless the policy is voided, then yes (voiding occurs under a small number of cases).

I thought people were getting four-figure compensation...??

With recovering stockmarkets, compensation payouts are reducing with a number of providers (although no doubt getting bigger with the worst endowments).

There are quite a lot of people who get upheld complaints but no compensation because their endowment is doing quite well and currently puts them in a position higher than they would have been on a repayment mortgage.

You need to look at the quality, or lack of in many cases, of the endowment. However, you cannot assume they are all bad or good. Yours is off track but given the size of compensation, it wasnt by much.

JollyNolly

Okay - disappointing, but okay. But how about if I decide that paying off a chunk of my repayment mortgage is not what I want to do with the endowment, but rather pay of my expensive loan (see above). In that case I'm not incurring redemption penalties from my mortgage because I'm not redeeming it. So do I then get nothing?