Help with endowment please

Green.Lander

Hi,
I have two Scottish Provident 25 year endowment policies that have not paid out any annual bonuses in a while while the maturity values slowly decreases year by year. Details

Policy 1
maturity 04/2011 Projected values 4% growth £24300, 5.75% growth £25200, 7.5% growth £26000 or surrender value £20,446

Policy 2

maturity 03/2013 Projected values 4% growth £13200, 5.75% growth £14100, 7.5% growth £15000 or surrender value £9,843

I need £38,000 to pay off mortgage but can happly over pay to meet shortfall if i surrender both now.

Any advice as i am worried on the maturity value will keep failing Thanks

Green.Lander

forgot,

policy 1 monthly is £31 and policy 2 is £50.00

hope that helps

dunstonh

i am worried on the maturity value will keep failing

I would think that is a liklihood. If projections are using 4, 5.75% and 7.5% (which do not reflect the likely returns at all) and it fails to hit those figures then the projections will get worse every year.

No-one knows the future and you can only make a judgement call based on information available and you should see these as low potential products and not desirable. I would almost work on the assumption of no more bonuses on these. It wont be that bad but it is unlikely to be as high as 4%.

GGGG

Some hypothetical calculations-
Assuming you are currently paying the "interest only" part to your lender at approx 4.0%, your payment is about £127 per month. Add on the cost of your endowments (£31 + £50) at £81, your present mortgage outgoings are £208.
If you chose to surrender your endowments now, given your valuations above at £20446 + £9843 (£30289) & paid these off your mortgage balance, you would be left with a remaining loan of about £7711.
If you continued to pay the £208 you are used to spending each month, at a more conservative rate of 5% you would clear the remaining balance in about 3.5 years (quicker if the interest rate was lower).
in view of the uncertainty regarding how your endowments may perform in the near future, this option may provide the best solution.

Hope this helps...

EdInvestor

What interest rate are you paying on your mortgage?

What are the guaranteed values of the policies (guartd sum assured plus declared bonuses)?

Green.Lander

My current interest rate is 2.75%

and the garanteed sums with declared bonuses are £21684 and £11486 i.e total £33170

I figure out that i will pay around £2791 in additinal payments so nothing really in it