Endowment - Would I be better off cashing it in?

angel001

I've had an endowment for almost 10 years and now don't need it for my mortgage - I changed to a repayment mortgage a while back but kept the endowment for future savings.

I now pay 40% tax (just) and was wondering if this means that whatever profits I would make on my endowment in the long-term would be taxed at this rate. If so, I take it I would be better cashing it in now and putting it into an ISA (which I don't have at the moment) or putting a bit towards my mortgage.

Any comments welcome - I'm a moneysaving newbie! :beer:

EdInvestor

The tax issue is not a problem.Post some more info on the endowment

Provider
Guaranteed sum assured
Declared bonuses
Surrender value
Monthly premium
Maturity date
Maturity forecasts
Interest ratepayable on mortgage

angel001

Here's more info:

It's a Scottish Provident endowment. Sum assured is £24K.
Last letter I received said there was a significant risk of shortfall (I now don't need it for my mortgage though.) Bonuses are £1500.
Maturity date is 2024. My current mortgage rate is 5.78% (fixed for 5 years.) Found out today that surrender value is 10K. (I have put in 12K so far so is currently a loss.)

Thanks for any help.:j

EdInvestor

Please post the rest of the info listed above for a view.

angel001

Oops sorry, should have said that monthly premium is £107.82.

If investments grow at 4% it says that the projected final amount would be 45K or 5.75%, £55,600.

EdInvestor

[QUOTE=angel001;20876661

If investments grow at 4% it says that the projected final amount would be 45K or 5.75%, £55,600.[/QUOTE]

If you cashed in this policy and used the lump sum to reduce the mortgage, also increasing the monthly mortgage payment by the amount of the endowment premium, at maturity your return would be 53,816 and that's guaranteed.

There would appear to be no extra premium for taking a risk left in this policy, so I would dump it unless you need the life cover and would have a problem replacing it.

Rotaxman

Edinvestor,
I have a similar problem, if you don't mind me asking too ? I have all the info you asked for;

provider is SL,
guaranteed s/i is £20719
decl bonuses are total to date of £12650
surrender value is £26236
premium is £88.76
maturity date is aug 2014
maturity forecasts are @ 3.75% - £35100 @ 5.5% - £38300
interest rate is 4.69% (SVR) as our fixed rate ended

annual value is less than last year despite my payments and I fear it will only decrease more and I'll lose even more. Its already at 50% of what I was promised when I took it out and compensation for missellling made little difference.

Many thanks for your time and help

EdInvestor

Rotaxman wrote: »

maturity forecasts are @ 3.75% - £35100 @ 5.5% - £38300

With this policy if you cashed it in and used the lump sum to reduce the mortgage, also paying the premiums in every month, your return at maturity would be 39,006 with no risk.

This comfortably beats SL's forecasts so I would bin this one forthwith.Replace the insurance first if you need to.

Rotaxman

Many many thanks for your advice, its what I had thought to do, but its such a minefield and its so difficult to know who to trust. I'm going to get onto it now.

Thanks again for your help, you're a star !!!:beer:

angel001

Ditto - thanks for your contributions, much appreciated. :T

silvercar

Another one, I've also got a SL policy, figures very similar to Rotaxman but my mortgage rate is currently only 1.25%. Does this make a difference?