Should i sell or risk losing £15,000!!!

md0u9166

I would like some independent financial advice regarding my current endowment policy with Abbey Life Assurance Company Ltd.

In April 1992, I took out an endowment mortgage policy of £34,500 (target
amount) over a period of 25 years. I have been told that the endowmwent
policy is at HIGH RISK for not achieving the target amount in 11 years
time. The current predictions on a 6% growth rate will leave me with a £15,000 shortfall!!

I have contacted Abbey Life and they have made an offer of compensation
of £3,818.27 in accordance with the guidance issued by the FSA. This
calculation works out the amount of capital I would have repaid had I
taken out a repayment mortgage rather than the endowment mortgage.

If I surrender my Abbey Life Plans I will only get £5000 (plus £3818.27
making about £9000) of the £14,000 that I have paid in. That makes a
loss of about £5,000. However, if i don't surrender my policy i could be losing
£15,000 at the end of the plan.

What should i do? I know that predicting the stock market is difficult but i am wandering if i should cut my losses now or keep the plan and see if i will get my money back in 11 years time!!

Help!!!

I look forward to your reply.

Thank you for your time

Amir

dunstonh

I would like some independent financial advice regarding my current endowment policy with Abbey Life Assurance Company Ltd.

It is against board rules to give any regulated financial advice on the forums. Plus, with the info you have given, there isnt enough there to give proper advice either.

Some information though....

The shortfall projection is just an example of what you may get back if you achieve 6% p.a. These projections by themselves are not very reliable and often do not reflect the potential of the fund(s) you are invested in. Also, some providers project from the surrender value and not the current value and this can lower the figure by many thousands of pounds.

Abbey Life policies were usually very expensive to set up but tended to have lower ongoing charges than average. This means you have probably paid the bulk of the charges and the ongoing ones from this point could be quite low.

Abbey Life offer a range of investment funds. You havent mentioned what you are invested in and seeing as it is an investment here we are talking about, that is the most important thing there is to know. Some of the abbey life funds have been into 20% a year growth rates for the last 3 years (compare that to the 6% projection!!!) and others do have potential to exceed the 6%.

More information about the plan is required. Also, you should note that if you switched to repayment now and surrendered the policy, you would not be losing a penny. The redress paid puts you on par with being on a repayment mortgage. Only if you hold on to the policy will you be facing a further potential shortfall or potential surplus.

EdInvestor

Also, you should note that if you switched to repayment now and surrendered the policy, you would not be losing a penny. The redress paid puts you on par with being on a repayment mortgage. Only if you hold on to the policy will you be facing a further potential shortfall or potential surplus.

The redress assumes that you proceed as follows:

1.Surrender the policy

2.Use the surrender value and the redress together to reduce the amount owed

3.Remortgage to repayment and increase the monthly mortgage payment by the amount of the endowment premiums


You should really see a mortgage broker to get an idea of what deals might be available ( look for a lower interest rate).

Another possibility is to keep the mortgage you have now, but use the S/V and redress money to reduce the amount owed and increase the monthly payment by the amount of the endowment premium so as to overpay it and further reduce the amount owed.

It really depends on whether you like the flexibility of an I/O mortgage (assuming the interest rate is now too high) where you can stop overpaying temporarily if you have a problem, or the peace of mind of a repayment loan.

abbecer

We sold our endowment as it was looking like it would have a large shortfall. We didn't get back as much as we paid in, but for us it was the right decision. With our repayment mortgage we know it will pay in full and it is nice to see the amount reducing year on year. I think eleven years is a long time to worry about something you really have no control over.

Rebecca x

md0u9166

abbecer wrote:

We sold our endowment as it was looking like it would have a large shortfall. We didn't get back as much as we paid in, but for us it was the right decision. With our repayment mortgage we know it will pay in full and it is nice to see the amount reducing year on year. I think eleven years is a long time to worry about something you really have no control over.

Rebecca x

Hello again!!

Just replying to clarify some issues related to the initial plea for help. The Abbey Life Endowment Policy is linked with Life Assurance for me and my wife. The Endowment premium at commencement on the 02/04/92 was £79.79 per month. A bolt-on of £10.00 per month was added on 02/04/97.

The current surrender value after 14 years is about £5,500. There are 11 years remaining on my mortagage term. The original mortgage lender was Halifax. The plan is not MIRAS qualifying.

I do not understand the 'decreasing term assurance premium of £36.97'?? What does this value represent??

An offer of compensation of £3,818.27 will still leave me £5,000 short if i surrendered the policy now. Should i accept the compensation and stick with the policy? Should i accept the compensation and surrender my policy and accept a loss of £5,000 rather than risk losing £15,000 at the end of the endowment plan.

Help me!!!

Amir

rchddap1

No-one here can tell you what you should do, as they don't know your full situation. If you want proper independent advice you should seek out an IFA local to you. Again, they can give you their thoughts, but the decision at the end of the day is down to you.