Prudential Enowment 1995-2015

Captain_Fishy

I have a £55k Prudential Unitised With-Profts & Unit Linked Endowment, commenced 1995 and sceduled to mature in 2015. My mortgage is paid off and therefore this endowment is not required for that aspect.

Currently it s value is less than the contributions I have paid, i.e.value at 31/12/2008 is £22,377, and my contribution are £23,822, clearly this is not performing at all well, and I am considering selling it on.

My questions are:

1) Is the performance likely improve in the final years? (obviously market driven but are there other factors?)

2) Is the option to sell and use the capital obtained plus maintain the monthly payments to reinvest / dripfeed into in blue chip stocks a better option? (at leat I would be in control?)

3) Any advice / reccomendations / tips / pros / cons on selling this or any endowment?

thanks in advance
The Cap'n
><)))))('>

dunstonh

1) Is the performance likely improve in the final years? (obviously market driven but are there other factors?

Yes. I have noticed that Pru have reduced a number of their MVRs recently. One policy surrender valued at just over £50k a few months ago now has a surrender value at just over £55k.

Pru have a strong WP fund and its track record is sound and future potential pretty good. However, investment returns themselves are always unknown.

2) Is the option to sell and use the capital obtained plus maintain the monthly payments to reinvest / dripfeed into in blue chip stocks a better option? (at leat I would be in control?)

That option exists but it will mean you move up the risk scale and it will depend on the quality of investments you choose.

EdInvestor

Captain_Fishy wrote: »

I have a £55k Prudential Unitised With-Profts & Unit Linked Endowment, commenced 1995 and sceduled to mature in 2015.

You won't be able to sell this policy, you will have to surrender it.Is it 50/50 unitised WP/unit-linked?

1) Is the performance likely improve in the final years? (obviously market driven but are there other factors?)

The unit linked bit should be starting to improve now as the markets come back.The WP bit may be subject to an MVR and that could be lifted later.

2) Is the option to sell and use the capital obtained plus maintain the monthly payments to reinvest / dripfeed into in blue chip stocks a better option? (at leat I would be in control?)

In due course I would say yes because you can avoid high charges and tax by dumping the endowment.I would wait for a while until the policy value improves as markets get healthier and then go ahead with the surrender.

Captain_Fishy

Is it 50/50. at this stage I dont know but will endeavour to find out?
Could you expand on the tax implications please?

EdInvestor

Gains in an endowment are taxed @20% within the policy which you can't reclaim.This is not the case with other investments.An ISA is a much better choice of wrapper - the endowment is effectively obsolete.

jamesd

Blue chips probably aren't going to be worthwhile as a reason to sell. If you were using a mixture that included international funds then you'd have good chance of doing better.

dunstonh

Gains in an endowment are taxed @20% within the policy which you can't reclaim.This is not the case with other investments.An ISA is a much better choice of wrapper - the endowment is effectively obsolete.

Gains in equites at taxed at 20% after indexation. In reality its often closer to 10%. Income is treated more or less no different to other investments. The Pru endowment may now have lower charges than the unit trusts which should more than offset the small tax difference.

Personally, I would prefer unit trusts but if the OP is inexperienced and feels that blue chips are a good option then I would probably be inclined to keep the endowment.