Endowment - Can someone confirm good/bad one ??

wymondham

Hi All
We got our endowment in 1990 for £36,995 over 25 yrs with Eagle Star (now Zurich) via Bristol & West BS. In last 5 years we started to get red letters and have increased premiums to £151 p/m - we are now back on track with green letters. We have a guarenteed payout of £36,995 as we have increased as recommended. As we are now around 10 years 'till the end, should I be looking to cash in, or leave? - we have just had a four figure payout from zurich for mis-selling also....
Any views appreciated!!!

forgot to add surrender value is currently £13,640

dunstonh

What funds?
What is current value?
what is surrender value?
if conventional with profits, what is the guaranteed sum assured?
what are the annual bonuses?
what is the terminal bonus?
what are the surrender penalty reductions over the remaining years?
do you still need the life cover?

wymondham

thanks for the quick reply...

the only info i know is the guarenteed sum assured is £36,995
we still need life cover
current surrender is £13,640
** following taken from may 2005 statement **
basic benefit : £29,469
existing bonus £3,674
new bonus £76
accumulated benefit £33,220

i don't know any other info i'm afraid so sorry about that - does it look like a lame duck?

EdInvestor

Hi wymondham

If you surrendered it now and put the cash on deposit@4% also paying in the premiums to maturity you should receive a guaranteed 42,414.

So you need to compare that with Eagle Star's projected returns @4% and 6%. If you could post these it would help.

It appears that the guaranteed value you will definitely receive at the end is 33,220 plus whatever additional small bonuses ( eg 76 quid) they add over the next 10 years.

So surrender and savings will have no problem beating that and of course if you use the money to reduce the amount owed on your mortgage, your return will usually be higher ( at the level of the mortgage interest rate).You need to deduct the cost of new life cover as well.

Post the projections so we can see how the risk part of the policy might perform.

wymondham

thanks EdInvestor

I only have last years figures to hand (March 2005), but in this I'm given 3 figures:
3% = £695 shortfall
3.75% = £1,105 surplus
5% = £4,805 surplus

In the policy it has a condition that providing all increases as a result of reviews are taken up (as they have been to date), they will pay out at least the target amount when the plan matures - in the last 10 years of the plan (about to start), then any premium increases are automatic. I've assumed here that this means if I keep up with increases then it will pay at least £36,995 - Am I wrong here?
Another thing here is that we have reduced our mortgage since taking this out, and we only need it to pay £34,749 rather than the original £36,995

EdInvestor

These projections seem to translate into:
3% 36,300
3.75% 38100
5% 41,800

.....compared with cash @4% of 42,414 , which is better than their projection at 5%.


So you're paying a lot in charges and for the life cover.The fact that they can automatically increase your premiums over the next 5 years is even worse. Why take risks when you will get more not taking them?

I would definitely consign this one to the bin.

wymondham

thanks for that, I'll have to give this some serious thought!
out of interest, how do you calculate compound interest?

cheers!!! :j

wymondham

just tried to sell this to surrendalink but they don't want it - must be a bad one. looks like I'll have to cash it in for £14k with zurich!
is £151 a month expensive for this policy??