Keep Clerical Medical endowment or not?

madcow2006

We would appreciate your thoughts on a Clerical Medical with profits endowment policy that we have, should we keep it going or cash it in?

The endowment orignally taken out in 1987 to cover £36,000 mortgage but we have switched to repayment basis so it's not supporting the mortgage.

Our thoughts at the moment are to keep it going, but it is tempting to cash it in, save ourselves the premiums each month & use the surrender value to help pay off the mortgage now.

Here's the details;
Policy taken out in 1987 over 25 years to cover target amount of £36,000
Sum assured £12,000
Monthly premium £46
Total regular bonus to date is £10,500
There is supposed to be a terminal bonus on the policy, whatever that is worth!
Current surrender value £16,000
Projected final amount at 4% is £24,200
Also we sucessfully got compensation of £4,000 on the policy a couple of years ago.

Any views appreciated, thanks

Madcow :beer:

EdInvestor

Hi madcow

If you surrendered this one and put it on deposit @4% also paying in the premiums until maturity you should get 23,985. That compares with a guaranteed value so far of 22,500 and a projected value at maturity of 24,200, which is slightly higher.

There is a small terminal bonus in there it seems and of course the policy also gives you the life cover. THe TB might imporve over the remaining years but the CM fund IIRC is only a middling one, not likely to produce more than 5% at most. You would expect a better premium over cash for taking stockmarket risk if you were considering the investment now.

Assuming you would get a higher guaranteed return if you cashed it in and reduced the amount owing on the mortgage, then I can't see that the attractions of this policy are such that it's worth keeping.If you had a problem with getting replacement life cover that would probably be the only reason for hanging onto it.

madcow2006

Thanks EdInvestor, that's got us thinking.

Anyone else with a view on our situation?