Phoenix/RSA endowment: Should I sell it?

corky_the_bung

I have an Endowment policy with Phoenix which was intended to repay a loan of £36000.
This was sold o to Phoenix by Royal and Sun Alliance.
It matures in November 2014.

Recent statement from Pheonix said:
Guarunteed sum assured : £11880
Declared bonus : £4933.03
Bonus added in 2005 : £16.80
They quoted £18600.00 (@ 3.75% growth) and 20200.00 (@ 5.25% growth).

The surrender value is £10839 but I think I can proabaly get £1446
more by selling it (according to Absolute Assigned Policies)

My caclculations show that if I sell it and get £12285.00 and stash the monthly premiuom of £44.05
then I'd have £24444.63 (assuming I avoid the interest on my mortgage @5.1%)

Clearly this beats the optimistic projection figure (£20200).

The question is how realistic the optimistic projection is?....
Is it likely to beat this or be worse the pessimistic figure?
I think it all comes down to the value of the Terminal Bonus.

I realise this is a bit of a crystal ball question, but was wondering if someone has an opinion?

I am considering paying off my mortgage with cash ISA savings so the life insurance component would be a non issue.

When I phoned up to ask for a projection, I commented that I was surpised by the figures given that the markets have been good for around 3 years. I was told that the investment may not be in stock market related funds but in fixed interest securities. If this is the case I'm assuming this really is doomed to a generating a poor return!

dunstonh

The surrender value is £10839 but I think I can proabaly get £1446
more by selling it (according to Absolute Assigned Policies)

I very much doubt it. I would put money on them turning it down after they look at the policy in detail.

The question is how realistic the optimistic projection is?....

That is the question everyone should ask. Some projections are below what the endowments are achieving so understate the potential. However, I'm afraid you are the opposite. Phoenix don't offer much potential for future returns and I wouldnt even bank on the 3.75% in the medium term.

I realise this is a bit of a crystal ball question, but was wondering if someone has an opinion?

You are correct in that no-one knows for sure but given that Phoenix buy failed insurance companies with the aim to milk them for profit and run them down to closure, its fair to assume that future returns will be limited.

When I phoned up to ask for a projection, I commented that I was surpised by the figures given that the markets have been good for around 3 years. I was told that the investment may not be in stock market related funds but in fixed interest securities. If this is the case I'm assuming this really is doomed to a generating a poor return!

You are not fully in the stockmarket and have very limited overseas exposure (which is where much of the growth has been in recent years). With increased FSA solvency requirements, lower volatile investments will form part of the with profits funds in the insurance companies that do not have large reserves.

corky_the_bung

dunstonh wrote:

I very much doubt it. I would put money on them turning it down after they look at the policy in detail.

I got a letter from them yesterday stating:

"We are delighted to make a firm offer for the sum of £12284 for your policy"

Then goes on to say:

"This firm cash offer is greater than your life office surrender value and is subject to confirmtion that the details are as shown above, that all premiums have been paid and is open for a period of 7 days from today's date."

Seems clear enough.

I have had 2 other prices also.

One from Surrendra @ £11814
The other is from Foster & Cranfield who will auction it and estimate nett proceeds between £11396 and £11663.

So yes, the AAP offer is by far the best.

In any case it seems clear that it is likely I'd be better of ditching this, even at the lowest auction price, I'd be 2600 better off (assuming 0 terminal bonus and middle growth of 4.5%)

Actaully it isn't clear to me if any terminal bonus is factored in to the projections. Or if this is simply a pure growth figure.

dunstonh

Well, thats the first confirmed ex R&SA endowment thats been sold in a long time. All previous posters have found that the offers get withdrawn before they get to the point of re-assignment.

Terminal bonuses are not included in any projection forward (either those accrued already or those potentially available in the future).