Cashing in or selling endowments?

Jenny_Pennies

My husband and I have an endowment and an ISA each that were taken out in 2000 when we took out an interest only mortgage. We are about to start again with a new 25 yr repayment mortgage as we are about to move house. We want to keep the ISA going as a future savings plan but want to free up the money in the endowment to help with moving costs. As the endowments will no longer be needed to pay off the final mortgage sum can we do this?
Thanks in advance!

infobank

Yes you can, but you may find that the payout from the endowment company is less (in total) than you have paid in in monthly premiums.
Be aware, also, that you will terminate the life cover that goes with it.
If the endowment is a "with profits" type, you may get more by selling it to a trader; try:
http://www.aap.co.uk/
but as the policy is fairly new, they may not be interested.
Try also:
http://www.fsa.gov.uk/consumer/01_WARNINGS/endowments/mn_trading.html
for advice and infromation from th FSA.

EdInvestor

Post some info about the endowment to see if this is a good idea at this time

Unit linked or WP
Company it's with
Guaranteed sum assured
Declared bonuses
Surrender value (ring up)
Monthly premium
Maturity date

Jenny_Pennies

Thanks for the reply
It is a with profits endowment with Norwich Union, due to mature in April 2025.
I make payments of £75 a month and at the last statement (April 05) it was worth £4,253.82. There is no guaranteed sum but the target amount is £36K
A good idea to sell?

EdInvestor

Sounds like it's unitised WP, and these policies can't be sold.

Post the updated surrender value for a view on whether it's a good idea to cash it in.

Jenny_Pennies

Will give them a call tomorrow to find out the surrender value - thanks

dunstonh

NU plans from that year have a range of funds available. Some of the alternative funds would be higher potential. Plus, with your timing of taking it out, this could turn out to be rather a good endowment. That would depend on the target growth rate used but dont be hasty on this one and make a snap decision.

Jenny_Pennies

Thanks for the replies so far guys.
The surrender value is around 5k when we called last week. Although it may turn out to be a good endowment we have the problem that we have an endowment and an ISA each that were collectively going to pay off the mortgage capital. Now that we are about to embark on a 25 yr repayment mortgage we can't afford to keep the endowments and the ISAs going.
We would like to keep one going each as a savings plan and given the performance of endowments generally assumed that this was the best one to cash in.
However just looked at the last statement from my ISA (Oct 05)it seems to have a total value of just over 4K.
Now really confused and don't know which one to give up! But at least one of them does or I stop being able to eat or go out when we move
The ISA is with Skandia but is a Henderson Ethical (althought I have a feeling it might be called something else now...) Will try to find out a bit more, was even more of a financial bimbo when I took out the ISA!
Really appreciate the advice so far, you're a helpful lot!
JP

dunstonh

The endowment could be cheaper long term if switched to some of the NU life funds (such as the cracking NU Property fund as an example).

What you need to do really is find out if the other funds are available to you on the endowment and then get a projection on both the ISA and the endowment (endowment at 6% and ISA at 7%) and then factor in cost of life cover (endowment already has it, ISA doesnt). Then see which of the two is cheaper. As most of the NU funds are also available in ISAs, this allows a true like for like check on charges and cost.

Also, from memory (and it really is a case of cant be sure) but the NU plans of that era i think had a steped down penalty on surrender. It may be that the penalty after 10 years is much smaller than before. In which case, it may be a case of keeping the endowment until the lowest surrender penalty point (or lower) and switching to alternative funds of higher potential.