DO I SURRENDER FRIENDS PROVIDENT ENDOWMENT NOW?

walsh_3

DESIGNED TO REPAY £22,000 BUT HAVE NOW SWITCHED TO REPAYMENT MORTGAGE. WE ALSO HAVE (I THINK) ADEQUATE LIFE INSURANCE SO NOT A PROBLEM.

WE HAVE PAID IN £34 PER MONTH FOR LAST 13 YEARS AND IT IS NOW WORTH £4,500 (SURRENDER VALUE) (APPROX £1,300 LESS THAN WE PAID IN!!)

SHOULD WE SURRENDER NOW - WE MOAN ABOUT IT EVERY TIME WE RECEIVE A STATEMENT AND STILL DO NOTHING ABOUT IT!!

dunstonh

WE HAVE PAID IN £34 PER MONTH FOR LAST 13 YEARS AND IT IS NOW WORTH £4,500 (SURRENDER VALUE) (APPROX £1,300 LESS THAN WE PAID IN!!)

Surrender value is usually worth less than you pay so no suprise there.

SHOULD WE SURRENDER NOW - WE MOAN ABOUT IT EVERY TIME WE RECEIVE A STATEMENT AND STILL DO NOTHING ABOUT IT!!

Nowhere near enough information. For example, if you were invested in their fixed interest and property funds, you would be well over target whereas in their equity funds, you will be under but with the stockmarket drop, you would be buying units much cheaper.

If you are in their with profits fund, it would depend on the target growth rate required, guaranteed sum assured and annual bonuses and final bonus earned to date. Along with current value and remaining term.

Not all endowments are bad and even if some are, with a bit of fund switching/redirecting it can be more beneficial to hold on to them until the end of the term. Especially if you are a higher rate tax payer.

walsh_3

IT'S DEFINITELY NOT WITH PROFITS.

WHAT WE WERE GOING TO DO WAS PAY OFF SOME OF OUR MORTGAGE - WOULD THIS MAKE MORE SENSE.

£35k REPAYMENT MORTGAGE - 13 YEARS LEFT TO RUN. IF WE PAID OFF SAY £5,500 PRESUMABLY IT WOULD REDUCE THE TERM BY A GOOD FEW YEARS.

feebasedadviser

i suggest you:

write to FP for an up to date projection (if you don't already have one). you actually want 2: one assuming you pay the premiums to maturity, and one assuming you stop. also ask for the current surrender value. (looks like you've done this)

then reduce yr o/s mortgage amount by the surr val and ask yr lender to recalc yr mortgage term on the lower figure with the same repayments as now. (hopefully you have this facility with the mortgage)

if you keep the plan you need to really think about which fund you should remain invested in. also, ask FP what ongoing charges there are on the plan. there will prob be a plan fee and charges on the money being invested. then take this figure of all the MONTHLY charges and divide it by the premium. if it's over 6-10% then i would consider ditching. in other words, yr fund would need to perform at this level every year JUST TO BREAK EVEN. if used to reduce yr mortgage amount then at least you will get a real return on the money immediately.

walsh_3

I've just found out it's unit linked with no bonuses at all. Even Friends Provident say these are very volatile.

dunstonh

I've just found out it's unit linked with no bonuses at all.  Even Friends Provident say these are very volatile.

Unit linked doesnt mean volatile. You can have very low risk funds as unit linked and FP do offer these. Indeed, some of the low risk unit linked FP funds are good performers. Particulary their commercial property fund.

I am of the view that its better to be in unit linked funds at this time than with profits as they offer greater potential than the WP fund (from an FP point of view).

If the endowment has a target growth rate of between 4 - 7%, then unit linked funds could well be adequate with a fund spread.

It would be better to know what unit linked funds you are invested in.

feebasedadviser

i still say check the charges.

for example, i saw one plan recently with FP where the monthly premium was £68 and the charges were £7.10pm, over 10% of the prem. so you'd need to gain at least 10% every year JUST TO STAND STILL, whereas you'd get 5%+ pa by leaving the money in the mortgage.

worth thinking about.