quotes for selling an endowment

steveceltic

I am looking to sell my Scottish Widows endowment and have had a few quotes but it seems to me that the offers are based on the 'surrender value' of Scottish Widows. Everyone asks for this surrender value and they all quote just a little above it.

No one will quote without me telling them the surrender value!

Yet the 'total sum assured' is already a good deal higher than the 'surrender value'.

Anyone any advice?

EdInvestor

The surrender value is what the policy is worth now.

The total sum assured only comes into play at maturity.Did you expect the buyers to pay you a lot more than the policy is worth,pay yet more money into it and wait for many years to get their money back?

How would they make a profit from doing this?

steveceltic

It seems to me that they will make their profits when the policy reaches its termination date when all the bonuses are added including a fresh terminal bonus.

But let's be clear about the situation right now: as you say in your terse reply the policy's value could well be the surrender offer from the endowment company. In my case they are offering £19,689, yet the total sum assured is already £24,673. In other words the endowment company is making a profit right now of 24673 minus 19689 even though they paid themselves handsomely in the first few years of the policy and have taken a cut in every subsequent year.

I feel that a profit equal to 25% is very generous to them. Especially as the reason it is being sold is because it won't fulfil what it was supposed to do: 'pay off the mortgage and offer cash back'.

For sure profits make the world go round but being shafted by various financial institutions brings the world of commerce to a grinding halt. Ask any rep trying to sell pensions how tough it is right now. Who trusts banks or insurance companies these days?

EdInvestor

In my case they are offering £19,689, yet the total sum assured is already £24,673. In other words the endowment company is making a profit right now of 24673 minus 19689 even though they paid themselves handsomely in the first few years of the policy and have taken a cut in every subsequent year.

I think you're misunderstanding how With profits funds work.The surrender value represents the total underlying value of the assets backing your policy right now, minus an early surrender penalty which is usually between 0 and 10% of the value of the policy (but may be higher if a market value adjuster is being applied).The MVA is applied to make sure people do not take out more from the WP fund than their fair share, as this would disadvantage other policyholders. It is not profit.

The total sum assured is not related to the asset share of the policy.The guaranteed sum assured has existed since you took the policy out (before it acquired any value at all) but is only payable on death or maturity - it doesn't reflect any value that has built up in the policy.The declared bonuses and terminal bonus (if any) do reflect the value, along with the premiums of course.

steveceltic

I wonder if you are mixing up the total sum assured, which as I understand it is the basic sum assured plus the bonuses and the 'sum payable on death' which is equivalent to the target sum borrowed originally for the house.

Ie surely the bonuses exist somewhere right now.

Thanks for taking an interest Edinvestor.

Steve

dunstonh

From day one the guaranteed sum assured exists but it only valid as long as you pay your premiums until the end of the term. By selling it, the person that buys it takes over those premiums and that cost has to be factored in.

Third party endowments did appear to be drying up a little towards the end of last year but recently a number of providers that were blacklisted (i.e. not wanted by 3rd parties) are now being accepted again. This could be linked to the fact that there is an expectation that more 25 year endowments will hit target than those that won't and its the short term ones mostly have problems.

steveceltic

Thanks for that Dunstonh particularly on the fact that the bonus money does actually exist.

So if the person who took out the endowment surrenders it then the endowment company hovers the bonus money up? Or am I missing something?

Steve.

dunstonh

If you surrender before maturity the guaranteed sum assured is reduced (significantly usually). The annual bonuses are kept but can be reduced by a surrender penalty or market value reduction. The final bonus is then worked out.

angela110660

steveceltic wrote:

I am looking to sell my Scottish Widows endowment and have had a few quotes but it seems to me that the offers are based on the 'surrender value' of Scottish Widows.

Just wondering who you have approached to see if they want to buy the endowment? May have to consider doing this ourselves soon. Alternatively we may surrended our endowment but do not know which would be the better option.

steveceltic

Angela, I must say all options feel disappointing so far.

The surrender value we were quoted by Scot Widows is more than the 'basic sum assured' but much less than the 'total sum assured' (ie the one with all the earned bonuses). The replies I have drawn so far point out, quite rightly, how the bonuses were never meant to be drawn down before the policy has run its course. But it does seem to me that heads they win and tails they win.

In terms of the offers to purchase the endowment policy they are usually just above the surrender value. All the prospective buyers ask for the surrender value and then (it seems to me) simply quote slightly higher. Certainly all this talk of getting between '10% and 40% more' has not proved true in our situation though maybe others are more fortunate.

The only good news is that it is easy enough to get quotes on line. Just arm yourself with all the details of your policy and try out a few sites.

Hope they are more generous with you than us.

angela110660

Thank you for your response. Certainly sounds disappointing every way. Ours is a Standard Life so we will wait for our shares before we possibly bail out. We still have 12 years of £83.28 per month ahead of us otherwise and the original target amount of £61K is now only estimated at £39500 at the highest rate - a shortfall of £21K. Our 2004 statement predicted the highest estimate at £52K. Every year we pay in more and are predicted far less. At least we have been able to change the mortgage to higher repayment/less IO mix to try and counteract the shortfall. We would probably have been better off saving all these years and putting the money in a good account with interest.