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Endowment - Keep it or dump it?
ro53ben
Posts: 3 Newbie
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
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
0
Comments
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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?Trying to keep it simple...0 -
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.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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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 advice0 -
You'll have to ring them up and ask for the up to date surrender value then.Trying to keep it simple...0
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Abbey National - Because life's complicated enough...hmmm.0
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