Endowment

jue

Just recieved my annual endowment update:

Its due to mature in Aug 2010, with clerical medical (with profits + terminal bonus)

It was suppose to cover 18K interest only mortgage

Do I leave it alone or cash it in and put that money on the morgage.
The surrender value is 10,473
The estimated final value is 14,900 (@ 4%)

My monthly payments are 26.16 (taken out in1985)
We are currently overpaying the mortgage (the endowment is only a small part of this) by twice the normal payment and are aiming to be morgage free by 2010 (our 25th anniversary)

Any thoughts gladly recieved

EdInvestor

jue wrote:

Do I leave it alone or cash it in and put that money on the morgage.
The surrender value is 10,473
The estimated final value is 14,900 (@ 4%)

Hi jue

If you surrendered it and put it on deposit @4% also paying in your premiums to maturity, you could expect 13,605.

This compares with the projected value @ 4% of 14,900, not bad. Given that the projection also includes free life cover and all charges, you can see that there is an extra terminal bonus in there.

I'd have thought this one is worth keeping, given your mortgage arrangements and providing you don't mind a bit of risk.

jue

Thank you Ed
You have added clarity to what we already thought. Wait until 2010 it is.
I feel like we are in a good postion mortgage wise and are paying it down as quick as we can (still having some enjoyment too

ReportInvestor

Current performance (on policies that have run their course) for Clerical Medical full cost 25 year WP endowments is mid way between average and lowest performer of those that choose to report to MoneyFacts.

But don't forget that some of the worst, e.g. closed WP funds, will simply choose not to report performance, so it's probably not as bad as it sounds.

I would endorse Ed's sums & conclusions.

jue

Any thoughts from anyone about claiming for mis-selling on this policy. DH is on a misson right now and has asked me to dig out all the relevant documents. We both remember being sat in the Building Society and told that we would definatly recieve extra money on top of the motgage repayment! We were young and a lttle dumb I suppose, but the sales advisor certainly never said the policy has a risk of not making the sum needed!
Is it too late? and what happens if we make a claim? do we then have to surrender the policy and place then remaining sum on repayment?

edited because I can't spell LOL

dunstonh

Is it too late? and what happens if we make a claim? do we then have to surrender the policy and place then remaining sum on repayment?

1985 start dates means that if it was sold by an IFA, solicitor or accountant, then you no avenue to complain. If it was sold by a bank or building society employee then you can. In 1985, its possible that even though it was bought on the premises of a building society, it was not a building society employee that sold it. You can confirm this by asking CM who the selling adviser was. If it is the building society, then you can make a complaint and expect them to review it, unless time barred. If it was an IFA, solicitor or accountant, then there is little point.

You may also want to find out if CM are projecting from the surrender value on that plan. It is quite possible on a 1985 plan that it is and that would make the projected values lower than they really are. As your shortfall projection isnt that big, that could make all the difference. Look at the last statement and tell us what the guaranteed sum assured is (usually around 1/3rd of the life sum assured) plus what the annual bonuses to date are.

jue

We were sold this policy in the Building society itself.
The sum assured is : 6336.00
Annual Bonuses to date : 6774.00
To be honest I don't fully understand all of this.
Thank you for your help Dunstonh.

Just spoken to CM and they are unable to tell me who sold us the policy! They say to contact the building society.
The projected values remain unchanged;
4% 14900
6% 16500
8% 18300

dunstonh

In this case, I think they are not projecting from the surrender value but the current annual bonuses plus sum assured. It doesnt appear to include any terminal bonus. If you have a terminal/final bonus declared, can you tell us (sorry, i should have asked for that in last post).

To give you an idea of what I am looking at, if no further bonuses of any type were paid and it matured today, you would have £13,110 paid out. (sum assured plus annual bonuses).

Your surrender value was £10473 so if you surrender, you will lose £2637. You have around £1255 left to pay into this. So surrendering the plan would be foolish. Keeping it means you need to pay £1255 to be guranteed to get at least £2637. Thats a very good rate of return looking from this point forwards. (im not looking backwards or over the whole term. Just from this point to maturity which is the only way to look at these things).

If there is a terminal bonus accruing, then this would be added to the sum assured plus annual bonuses but wouldnt be included in the projection figures. Its possible (dont get hopes up yet) that your endowment could be further on track to hit target than you realise. Of course, when you check for terminal bonus, you could find out it is zero and that would scupper this but it is important to know how it is really doing and not just what the usually inaccurate projections tell you.

jue

There is a terminal bonus, but we have never recieved a projection on that and I have no idea what it could be. I always thought the projected figures at term included that figure, so it could be that is not included? and we will do better from the policy than we thought?
Thank you so much for your help.

dunstonh

Without knowing the figures, I can only estimate. However, if you look at the sum assured and annual bonuses and add 4% to that over the remaining years, it comes in quite a bit higher than £14900. That probably is due to charges/life cover cost. The figures dont give much scope for a terminal bonus.

For example, lets say you have a 45% terminal bonus at this point. That would put it at £6336 + £6774 +2851 = £15961. Thats above the 4% projection figure before you add in any more years. So from that you can assume that CM are not including terminal bonuses in their projections (which is not uncommon with many providers on conventional with profits plans).

For reference, a 25 year with profits endowment until Aug 2005 had an average return of 8.2%p.a. with CM. That includes Terminal bonus. If that yield remains at that level until maturity, you would see a surplus on your policy. It does make a bit of a mockery of the projections system as those policies maturing last year in surplus would have been given shortfall projections the years before.

Hopefully, you can see from above that the figures you have had are not likely to include any TB and could be better than you expected. However, to be sure, it may be a good idea to get CM to send you some figures including terminal bonus accrued to date or at lease some indication of the approx TB on your plan so far (some providers are a bit fussy on releasing TM information).

jue

That has been a great help thank you. I will write to CM I think and ask about terminal bonuses. That proberably means we won't have a shortfall at all! So therfore means its proberably unwise to go through all the channels for a claim LOL
Actually on looking at the policy again where it says special codes it says
T = the policy has a term assurance benefit in addition to the with-profits sum assured ( I thought this meant a terminal bonus,but now I'm not sure! ) Sorry for being so thick! LOL