Standard Life Endowment - Advice please!

zedonk1

Hi - My first post!
Just received my yearly Standard Life endowment - it was taken out to pay off a mortgage of £50,000. I need help and advice - should we cash it in?

Provider: Standard Life
Guaranteed minimum at maturity: £25,383
Surrender value: £18196 (as of yesterday)
Monthly premium: £64.00
Maturity date: Apr 2015
Maturity forecasts: £26,000 (3.75%) £29,300 (5.50%) £32,200 (7.25%)
Mortgage interest rate: 4.85 (fixed to sept 2010)
The MEP is £2,880 or £4,320.

Thanks Julie

EdInvestor

If you cashed it in and used the lump sum to reduce the mortgage also paying in the premiums to maturity you would end up with a guaranteed £29,516, which is higher than the guaranteed amount and all but the highest of the endowment forecasts.It's unnlikely they will nmeet the top forecasts so the risk premium in the policy has gone.

Why are there 2 figures for the MEP?

zedonk1

EdInvestor wrote: »

If you cashed it in and used the lump sum to reduce the mortgage also paying in the premiums to maturity you would end up with a guaranteed £29,516, which is higher than the guaranteed amount and all but the highest of the endowment forecasts.It's unnlikely they will nmeet the top forecasts so the risk premium in the policy has gone.

Why are there 2 figures for the MEP?

Hi
Thanks for replying.
Where do you get the figure of £29,516 from? Sorry cannot see how you made that figure? They have said the MEP could be £2800 or £4320 or could be nil - "This payment will be set in accordance with the demutualisation scheme and only be determined when plan matures."
Julie

EdInvestor

In that case I think you can forget the unguaranteed MEP and just use the other figure.This is the return you would get if you devoted the endowment lump sum and premiums to paying off the mortgage at the interest rate you quoted.

dunstonh

The MEP should not be ignored. The amount is in that range but the final figure will depend on future performance. The MEP is fully funded and there have been no indications or threats to remove it.

zedonk1

Still cannot see where the £29516 comes from!
Sorry for sounding thick . . .
Help!

sabretoothtigger

I dont know offhand what mep is, maturity bonus?

But I did the same as Ed, if you took your future premiums (64*(12x15)+6)and add it onto the cashing in value it would seem to favour not holding onto this endowment

Alternatively you could try and go for a longer fix on your mortgage rate which would reduce the risk of the endowment falling quite so short of paying it off


Cashing it in could help you get a lower LTV and better mortgage deal. You should probably take professional advice

dunstonh

You need to add the Mortgage promise value on to the projections. At mid rate thats £29,300 plus about £3500 making £32,800

zedonk1

QUOTE But I did the same as Ed, if you took your future premiums (64*(12x15)+6)and add it onto the cashing in value it would seem to favour not holding onto this endowment.

Hi sabre - please can you breakdown the sum above - I know the 64 is the monthly payment, but where does the 12x15+6 come from??? Thanks for replying.

sabretoothtigger

zedonk1 wrote: »

Hi sabre - please can you breakdown the sum above - I know the 64 is the monthly payment, but where does the 12x15+6 come from??? Thanks for replying.

I confused myself now, its 5 years and 6 months of £64 each month. So that should be 12x5 not 15