Endowment Advice

holmataramel

Hi,

My endowment policy is due to reach the end of it's 10 years and is currently valued at less than the money that has been put in. (No real surprise given the economic climate)

I now have a choice whether to withdraw the money or keep it going for another 10 years. I would really like some good advice on what to do. Withdraw and invest it in another way (mortage repayment?) or keep it going and hope that the market is strong in 10 years time. (Is it possible it could go full circle in this time?).

As you can probably tell I'm at a loss as what to do, so would appreciate some help.

Thanks in advance.

EdInvestor

Who is the provider?

Paying down the mortgage (if you wanted a guaranteed return) or using an ISA (where gains are tax free) are both likely to be a better bet than extending the endowment.

holmataramel

Friends Provident.

I think the mortgage payment may be the way to go unless anyone else has any other ideas.

maninthestreet

Put it like this - why would you want to invest even more money into a failing investment?

holmataramel

In the hope that whatever it has been invested in will pick up. Surely the last couple years worth of investments must have been done at low prices (compared to when the FTSE was around the 6k mark).

...or am I misunderstanding how it works?

EdInvestor

holmataramel wrote: »

In the hope that whatever it has been invested in will pick up. Surely the last couple years worth of investments must have been done at low prices (compared to when the FTSE was around the 6k mark).

...or am I misunderstanding how it works?

Afraid so, this is how unit linked endowments work, but WP endowments are different, for a start less than half your money will be going into equities these days.

If you are paying a mortgage interest rate of around 4% or more, then that's probably the way to go.

holmataramel

Cheers for the info and thanks for clearing this up. it is sounding like this needs to be withdrawn. My mortgage is tracked at 0.85% above the BoE base rate. is it still worth overpaying or putting the money elsewhere?

EdInvestor

Perhaps better to put the endowment money into an ISA until mortgage interest rates rise.

holmataramel

I'll look into that. Thanks again for the advice.