Should I still pay the endowment? or invest elsewhere?

Goldiethedog_2

8 years ago we took out an endowment to cover a £55K mortgage at a cost of £96/month.
We have remortgaged twice in the last 4 years and am now on a tracker repayment mortgage.
So the endowment was kept on for a nest egg at the end of the 25 years.
Is this a good thing to do or should we pay off more of the mortgage or invest this money in an ISA?

dunstonh

Is this a good thing to do or should we pay off more of the mortgage or invest this money in an ISA?

Depends. Not all endowments are bad and some are worse than the projections suggest. What have you got?

Goldiethedog_2

Not sure entirely but I remember taking the safer options at the time of the policy.
We have had numerous letters warning of shortfall though.
What should I be asking when finding out the type?

Thanks

Goldiethedog_2

It is a straightforward endowment mortgage with a sum assured of £25,974 and guaranteed death benefit of £55,000.
We've been sent "amber" letters in the past but aparantly todat it is on "green" and looking "very healthy".
Surrender value after all deductions is £8894 - better than I would have thought.
Would mean taking out additional life assurance tho cover this amount on existing mortgage also.

EdInvestor

Hi Goldie
Post a couple more details for a view:

Company it's with
Declared bonuses
Maturity date

Goldiethedog_2

Its with CIS and the maturity date is Jan 2023
not sure about declared bonuses though

Goldiethedog_2

total annual bonus = £2838
new annual bonus = £115

does that help?

EdInvestor

Hi Goldie

If you surrendered this policy and depositied it in the bank @4%, also paying in the premiums until maturity, you should end up with a total of 45,212.

This compares with your guaranteed value of 28,927 so far and a fairly low level of guaranteed bonuses likely going forward - the CIS With-profits fund is not AFAIK one of the stronger ones.

How does it compare with their projection of your policy's value at maturity if it achieves 4% growth?

If it's higher, there's not a lot of point in bothering with a risk based investment that could return less than a guaranteed cash one IMHO. You might be better off to junk it and use the proceeds to reduce the mortgage - which would give a guaranteed return at the mortgage interest rate.

Replace the life cover before surrendering,if you need to do so.