Selling endowment - tax implications?

JollyNolly

I really can't afford for it to lose value - with me this all about getting on top of debts in the most effective way possible. Which also means that if there is a chance of making a bit extra, even if it's only in the shortish term, I need to consider it. Maybe I should plan to hold onto it for the time being, but keep a keen eye on how it's performing, and be ready to pull the plug at any time?

JollyNolly

EdInvestor wrote:

Which particular NU WP fund are you in? There are 4: the old CU one, the old GA one, the old NU one and the CGNU one which is the one that is still open and quite well regarded. The older ones may not perform so well.

Rang them today, and they tell me that it's "just a conventional with-profits" account, "not unitised" (whatever any of that means). Does this make any difference?

EdInvestor

Not really.When you bought it, can you remember what the company was called?

Was it Commecial Union, or Norwich Union, or General Accident?

The thing is that your provider has taken over a lot of companies over the years and thus has several With profits funds.They are all different and so which one your money is in will have an effect on its performance.

I really can't afford for it to lose value - with me this all about getting on top of debts in the most effective way possible

THis would suggest that you don't want to take a risk - if so you should sell or surrender the policy and use the proceeds to reduce your debt ( pay off debt with highest interest rate first).

JollyNolly

EdInvestor wrote:

Not really.When you bought it, can you remember what the company was called?

Was it Commecial Union, or Norwich Union, or General Accident?

I'm fairly sure it's always been Norwich Union.

EdInvestor

The NU fund isn't the one which can be expected to perform reasonably well, unfortunately. Take a look at this table, which gives estimates of what TB you can probably expect at maturity for your particular WP fund:

http://www.norwichunion.com/lifefinbonus/

Looks to me like your TB will be c.5600 (based on a WP value at the moment of c.20k - your surrender value will include a penalty).

That makes a total of 27,564, only just over their projection at a 4% growth rate.

Is it worth taking a risk for the same return as you will get in the building society?

IMHO you should give up on this policy.Might be worth seeing if you can flog it, it's always worth seeking a quote as it's a means of checking the valuation.

JollyNolly

Thanks for your calculations, Ed. Just out of interest, I checked out Surrenda-Link for a price, and they came back with £20.5K (although I'm not sure that this is right as they have the policy down as "endowment" rather than "low cost endowment" if that makes a difference).

EdInvestor

Right if you can get 20,500 for it and you put that in the bank@4% also paying in the premiums to maturity, you should get 32,302 guaranteed.

Compared with these non-guaranteed projections:

Maturity projections -
- 4%: 27,400
- 5%: 29,300
- 6%: 31,300

The difference BTW is down to charges and life cover.So if you don't need the life cover there's not a lot of point in paying for it.If you do need it, factor the cost of replacement into the guaranteed return.