traded endowments

dollooboy

hi.

has anyone got any genuine info regarding traded endowment policies please?

thank you.

dollooboy.

EdInvestor

Info available here:

https://www.apmm.org

MiloH

dollooboy wrote: »

hi.

has anyone got any genuine info regarding traded endowment policies please?

thank you.

dollooboy.

Are you thinking of selling or buying?

If you're thinking of selling you may find a buyer willing to give you an uplift in value of up to 5%, providing the endowment you are thinking of selling has valuable guarantees, is in a well-managed fund, and the surrender value is sufficiently low relative to the value of the guarantees.

If you're thinking of buying you will typically pay 20% more than the surrender value if you do so via an IFA, about 15% more than the surrender value if you buy direct. This is to cover the 5% to the seller, the 5% to an IFA (if using) and 10% to the market maker. In view of the fact that most insurance companies claim that surrender values are targeted to reflect 100% of your fair share of the fund, in my opinion there's a good chance that you'll be paying over the odds.

If thinking of buying, an intersting alternative is a couple of investment trusts that own second hand endowments. You can typically buy the same type of investments for a much lower cost and without the hassle of paying the monthly premiums.

dollooboy

thanks miloH.
thinking of selling.
ive already checked out EDInvestor's link.
i think ive given the endowment companies enough of my money!

dollooboy

thanks ED.
ive already checked out your link.
very general question....i can get 40000 if i surrender now (not sell) or pay 150.00 p/m for 4 more years and probably get 50000. i need the money to pay off int. only part of mortgage. what would you do?
thanks again.

EdInvestor

What interest rate are you paying on the mortgage?

MiloH

dollooboy wrote: »

thanks ED.
ive already checked out your link.
very general question....i can get 40000 if i surrender now (not sell) or pay 150.00 p/m for 4 more years and probably get 50000. i need the money to pay off int. only part of mortgage. what would you do?
thanks again.

Based on those figures the guarantees are not too great. On the figures you gave the annualised guaranteed return is 1.57% per year. So you could cash-in and get a better return on a 4 year fixed rate bond if you wanted. On the other hand you might think a guaranteed return of 1.57% per year net of tax and charges with potential upside if the fund grows well is an acceptable return.

The more relevant question relates to the potential for a decent terminal bonus. That depends on the company you have the endowment with, how they manage their funds, their policy on early surrenders compared to going to maturity, the mix of investments in the fund and the prospects of a windfall within the next four years from a special distribution or a demutualisation.

A good and free way to work all that out is to do what you are doing and see if you can find a buyer. If someone is willing to offer you 5% then you know that they have a buyer willing to pay at least 15% more than the surrender value. That doesn't mean that the buyer is making a wise investment decision, but it does indicate that someone with a bit of knowledge has vetted it and likes the look of it.

By the same token, you might also take a rejection as an indication that it may not be so hot...

dollooboy

5.49 fixed until july 2101
50k int only (this is part of what i want to pay off)
120k repayment.

dollooboy

5.49 fixed till july 2010
50k int only (this is part of what i want to pay off)
120 repayment.
thanks