Endowment Headache

toolate

I have 2 endoment policies both not predicted to meet targets. Should I cash in now or wait and see.

1. Sun Alliance (now Phoenix) Low start economy plan
Started May87 now only 6 years to run £67.35 per month
Target £41,800
in march 05 basic bonus calc on £13,794 - total bonus earned £8049 new bonus for year £54.61
projected shortfall at 4.75% is £14,200.

I phoned today for surrender value and was quoted £17,789 after 19 years!
I wrote about miss-selling but was told it was estate agent(who no longer exists) fa. In 87 was told we'd have a lump sum of approx 19,000 also. as this was set up in may 1987 am I at a dead end too.

2. Provident Life (now Winterthur) 100% unit fund
started Nov 91 - 10 years left £45.87 per month
Target £28,200
current surrender value £8,668
nov 05 predicted shortfall at 4% of £12,000
Just been offered redress of £1,739
they said top up payments by £52 per month if want to put policy back on track.

I've looked on forum over last few weeks and just seen people saying zombie fund etc for these endowment companies. Should I stick with it until the bitter end as there is only 6 years to go on first one. A repayment over this short period would be enormous surely.

Sorry this is so long . Any ideas welcome

EdInvestor

toolate wrote:

Phoenix Target £41,800
I phoned today for surrender value and was quoted £17,789 after 19 years!

If you surrendered this one and put it on deposit @ 4% also paying in the premiums to retirement you should get 27,957.This compares with the current guaranteed vale of 21,897 which is unlikely to rise much with bonuses at 54 quid a year (Forget about any terminal bonus).So unless you need the life cover may as well surrender this one.

as this was set up in may 1987 am I at a dead end too.

Afraid so.Only big banks/insurers will consider pre 88 cases.


2. Provident Life (now Winterthur) 100% unit fund
started Nov 91 - 10 years left £45.87 per month
Target £28,200
current surrender value £8,668[/quote]

This one has no guaranteed value in the policy.So it's a question of whether you can get more than a 4% return in the bank by holding on.Doesn't look like it's worth taking the risk.

Just been offered redress of £1,739.A repayment over this short period would be enormous surely.

You need to go off to a mortgage broker to do some sums based on reducing the mortgage amount by the surrender values and redress money, and increasing the mortgage payment by the endowment premiums.

If you combine this with a new smaller mortgage with a better interest rate, you may be able to emerge relatively unscathed.Just hoping it will all work out in six years time is not the way to go, it won't.

payless

unlikely to rise much with bonuses at 54 quid a year (Forget about any terminal bonus

do you think this is likely for all providers or just RSA ?

dunstonh

payless wrote:

do you think this is likely for all providers or just RSA ?

The weak providers like RSA have limited potential. NU and Pru, on the other hand, are coming back round quite nicely.

Pobby

Just had the latest statement from Scottish Widows.Would that life company be one of the better ones?

dunstonh

Pobby wrote:

Just had the latest statement from Scottish Widows.Would that life company be one of the better ones?

I wouldnt want my WP fund there (not that I have any WP anymore) but 4% would be a good guide for Scot Wid potential

EdInvestor

No. The only decent WP funds these days are at the Pru, NU ( the CGNU fund only) and some smallish mutuals.

Pobby

Thanks folks.When I called them up they did say at present that they are giving a 45% terminal bonus.Any ideas please?

EdInvestor

Pobby

If you want a view on your policy post the following info:

Guaranteed sum assured
Declared bonuses
Current value
Surrender value
Maturity Projections
Monthly premium
Starting and Maturity date

Pobby

Basic benefit plus total declared bonuses 29,207
Declared bonuses10,007
Surrender value 25,000
Monthly premium 107
Starting and Maturity date 14/09/88 14/09/2013
basic benefit 19,200
Invested 23% equities
6% property
63% fixed interest
8% cash/other

Currently they have a terminal bonus of 45%.Is that an additional 45% on top of the total value of the policy at maturity?

By the way Edinvestor,thanks for your time.

EdInvestor

Hi Pobby, you're welcome

Pobby wrote:

Basic benefit plus total declared bonuses 29,207

This is the guaranteed value which you will receive if you keep paying in till the policy matures in 7 years time.In the old days you would get a giant terminal bonus on top of this guaranteed value, usually in the 100-200% range. Currently for maturing policies, you tell us it is 45%.

But the policy is invested
23% equities
6% property

Only 29% in risk-related assets with high returns, this is very poor After charges you can probably expect a return of something like 2-3%.

However if you were to surrender the policy now and put it in the bank @4% also paying in the premiums to maturity you would end up with 43,258, much higher than the guaranteed value.

Can you post the maturity projections for the policy?

They will give a better idea of the size of any terminal bonus.Quite frankly, the investment policy suggests that by the time your policy matures, TBs will be but a distant memory