Endowment - Keep it or dump it?

ro53ben

Back at the end of 1997 I bought a home worth £58,000 and with a small deposit ended up with a £56,000 interest only mortgage from Abbey National along with an endowment plan from Abbey life.

Since 11/12/1997 I've been putting £85.87/mth into the endowment plan and on enquiry on 6/3/2006 it is now worth £7059.40. I work this out to be about 100 payments totalling £8587 and a "loss" of £1500.

The endowment plan however also incorporates life cover, along with critical illness and waiver of premium benefit which could explain where some of the investment has gone; clearly something is paying these insurances.

My endowment matures on 11/12/2022 when it's target amount is £55920. For this, I need a rate of return of 7.79% which is unrealistic. Abbey themselves advised me, back in September 2000, that 6% is more realistic in today's world. This gives a maturity figure of £43,300 a shortfall of £12,620.

Hopefully that's a sufficient background for some advice?

Should I keep or dump the endowment? Why?

If I keep it, how much is a "safe" figure to assume it will be worth when it matures?

If I dump it, how much is suitable life/critical illness/etc. cover going to cost on the side?

As I see it, I'm going to be putting in another 200 payments totalling £17174. Add that on to the £7 it's worth today and I'm looking at a return of £24k with zero growth (although I guess it could go down as well as up).

I'm in the process of buying a new house and I'm not sure how much to borrow interest only, if any.

Any advice greatly appreciated.

Ben

EdInvestor

I assume this is a unit linked endowment?What funds is it invested in and what is it's surrender value?

Do you have an up to date maturity projection @4% growth?

dunstonh

If unit linked, tell us the fund(s) as 4% is probably way under its potential growth. 6% to 8% is usually the closer long term figure to loook at with medium risk funds.

ro53ben

I've found some more paperwork. My last paper update was Dec 2003

Projected final amounts

4% - 30,900
5.25% - 36,200
6.5% - 42,500
Target - 55,920

They reckon now that only 5.25% is a fair assumption.

I'm invested in 2 unit linked funds, one the "Managed Life Fund" and the other the "With Profit Life, Series III".

Unit value at 10/12/2005 (for illustration)

Managed Life: £4126.27
With Profit Life, Series III: 2503.51

Total £6629.78

I believe the £7059.40 (6/3/2006) was the current surrender value, but it could have been the plan value.

This is all the info I have.

Thanks for any advice

EdInvestor

You'll have to ring them up and ask for the up to date surrender value then.

ro53ben

Abbey National - Because life's complicated enough...hmmm.