Substantial Overmayment or Stick with WP Bond?

Ystrad_Lad

I'd be very grateful for your opinions on the following dilema.

I have a WP Standard Life Bond which has reduced in value since I bought it six years ago. The general view seems to be that things are not going to improve with Std Life WP products in the demutualised world and may even get worse. I've heard rumours that they may sell off the WP parts of the business.

I'm 52, my job ends in two years at which time I'm going to try self employment to keep the wolf from the door. I've no dependants and no debts.

I'm keen to reduce my repayment mortgage of £51k which has 12 years to run by cashing in the Std Life bond (now only worth about £19k) and paying off part of the mortgage. I've got about £5k other savings in ISAs and premium bonds.

Does this make sense or am I missing something?

EdInvestor

Unfortunately you bought at the worst possible time

What is the MVA (exit penalty) on the bond now?How much can you take out of the bond annually MVR free - 5% is it?

Does the bond have a maturity date when you can exit penalty free?

You may be best for the moment just to take out that annual amount and use it to reduce the mortgage, while waiting for the MVR to come down which should happen in time as the markets improve.

It could also come in handy as an income top-up after you stop work. It doesn't seem wise to plough all spare cash into the mortgage if a period of potential income instability is looming.

Indeed you may want to do the opposite - switch the mortgage to I/O for a period to cut outgoings if you have a real struggle with work.

[BTW you can take benefits from pensions - including the 25% tax free cash - after the age of 50.Worth bearing in mind if you have a real problem]

dunstonh

SL Bonds do have an annual penalty free withdrawal and most of the SL bonds have access to their full fund range so progressive fund switching within the MVR free allowance could occur.

There have been rumours about SL selling off the with profits business but that is unlikely to happen. Other companies that have gone down this route have sold the whole life and pensions business, not just with profits. With profits is just one fund of the many they offer and large numbers of people will have with profits holdings in addition to unit linked in the same plan and you cant sell off one bit without the other.

Ystrad_Lad

I invested £20k in 2000. Exit penalty is currently £3980 and the fund is worth£23127, so I'm almost in a position to get my original investment back - I should probably count myself lucky. I have recently started checking online and the MVR has dropped by £900 in the last 3 weeks. I didn't know I could withdraw any of the fund penalty free - I will ask the question. There is no maturity date. I've been told that the only time they would guarantee no MVR is on death!

Thanks for the info, I've been looking at the lump sum option too.