Should we cash in our endowment?

allisond

Hi we took out a unit linked life endowment in June 1993 with London&Manchester, it is now with Friends Provident.
It matures in June 2018. We also have another life policy.
We currently pay £98.05 a month as we ceased paying the unit linked increments about 10years ago.
The endowment is not linked to a mortgage. We are currently renting at the moment due to moving to a new area and haven't found another property to buy just yet so we don't currently have a mortgage just rent!
Gross Fund Value as at 29/01/2010 is £20,481.19
Cash Value as at 29/01/2010 is £19,643.95
Projected Value on 10/06/2018
£34,600.00 assuming 4% annual growth
£38,500.00 assuming 6% annual growth
£45,900.00 assuming 8% annual growth

Since june 1993 todate we have paid in £18675.20

Do you think we are wasting our time with this and should just surrender it? Am i right in presuming that it's not worth trying to sell it on as it's not a with profits fund.

All help most appreciated. Kind regards
Ally

dunstonh

Am i right in presuming that it's not worth trying to sell it on as it's not a with profits fund.

It is unit linked and has a daily value so you wont be able to sell it (nobody is going to pay more for units they can buy themselves if they wanted to.

Do you think we are wasting our time with this and should just surrender it?

Most of these plans have a range of unit linked funds and the charges ongoing are quite low (last few I have seen have AMCs of 0.7%. The hit on charges was in the early years. not now).

depending on the fund(s), the 8% projection is quite possible.

The endowment could be used against a future mortgage say for mid rate projection (i.e. first £38500 of the mortgage) which would reduce your monthly outlay and allow that amount to be cleared in 2018.

allisond

Thanks for the prompt response.
I also meant to say that we keep getting the red underperformance warning letters. So we were concerned that it may not even make it to the 4% growth figure.

You said 'depending on the fund' the 8% projection is quite possible. What do i need to find out about the fund to be able to make the decision as to whether it is worth keeping the fund going or not?
Would it not be worth a lot more now if it was likely to make the 8% projection? As it's only worth approx £1000 more than we have paid into it. How does it work for it to increase that much in another 8 years?

We wondered whether to surrender it now to put towards the next property.

Is it possible to find out whether current funds maturing now are being paid out by FProv at a profit - or meeting their targets etc...?

Most appreciated.

Investment Choice is MANAGED (EX FLEXIBLE) I (100%)

dunstonh

I also meant to say that we keep getting the red underperformance warning letters. So we were concerned that it may not even make it to the 4% growth figure.

It may not make the 4% figure but it probably grew by much more than 8% over the last 12 months. Most of the FP unit linked funds did last year.

The red projection letters are a guide assuming straight line growth. Investments dont give straight line growth. They zig zag. For example, the Managed (ex flexible fund) grew by 19.04% over the last 12 months but lost 19.92% in the previous 12 months. It grew by 4.66% in the 12 months before that and 9.24% in the previous year and 16.56% in the year before that. So, in that 5 year period, you had 3 years that exceeded 8%, 1 year that made just over 4% and one year that lost nearly 20%. Nothing like the example illustrations.

Is it possible to find out whether current funds maturing now are being paid out by FProv at a profit - or meeting their targets etc...?

That isnt how investments work.

allisond

Hi sorry for being thick but i don't understand how it could have increased by 19% as in June 08 we had paid £16,812.25 & it was worth £18510.97, then in June 09 we had paid £17,988.85 & it was worth £16474.94. It has always only ever been worth approx. £1000 more than we have paid into it, if not less than what we have paid in.

Am i missing something? .....

thanks again for your help.

Where do you get your figures from?

Confused... don't see how it can ever make it to £34k in 8 years!

dunstonh

Hi sorry for being thick but i don't understand how it could have increased by 19% as in June 08 we had paid £16,812.25 & it was worth £18510.97, then in June 09 we had paid £17,988.85 & it was worth £16474.94.

Global recession/credit crunch.

It has always only ever been worth approx. £1000 more than we have paid into it, if not less than what we have paid in.

Unlikely. During the dot.com crash and american accountancy scandals you would have seen drops then as well.

EdInvestor

allisond wrote: »

We wondered whether to surrender it now to put towards the next property.

What interest rate would you have to pay on the loan for the next property?

allisond

dunstonh wrote: »

Global recession/credit crunch.

Unlikely. During the dot.com crash and american accountancy scandals you would have seen drops then as well.

Yes i appreciate all of this, what i am trying to say is that every 6 months i have monitored it's growth/loss and it has never performed that well. I just wanted for you to explain why you thought it had increased by 19% at some point as my figures have never shown that. Incase there is something that i am not aware of. Therefore, not confident that it would make up to £34k over the next 8 years, so didn't want to waste any more money on it if it was unlikely to do well. Hence the initial post.

Many thanks

allisond

EdInvestor wrote: »

What interest rate would you have to pay on the loan for the next property?

Not sure yet, as we are looking at getting a property of about £600k and have about £450k (through house sale) to put down as a deposit. So until we find a house to buy and as the mortgage rates are changing quite a lot i'm not sure what interest we will pay. Obviously the best deal that we can get - we usually favour the trackers as they have always proven to benefit us in the long run.

Thanks for your post.

EdInvestor

To determine a way forward you need to compare the interest rate on the mortgage with the likely return from the endowment.So can't give much of a steer until you have a clearer idea on the rate.

Coveredinbees!!!!

I'm in the same boat I'm shelling out £90 a month and I've paid in about £1000 more than the thing is worth. I don't know whether to cash in or keep it going, we're 11 years in with 14 to go.