Endownmen cash in; advice needed

peterpajaro

Can anyone please advise me on the managed fund endowment that I have with the Friends Provident. The question is, do I cash in or leave to mature in 2015?

I am 60 years old and retiring in May this year. I have £55,000 outstanding on my mortgage which I intend to clear on retirement with my pension lump sum. My Friends Provident endowment was supposed to do this in 2015 but the forecasts are nowhere near. £31700 at 4% growth, £34200 at 5.5% growth and £38800 at 8%. The current cash in value is £24,800. I am paying £120/month for this which means I have to pay out another £7200 over the next 5 years. I don’t understand how these things work because 2 years ago the cash in value was less (£23800) but the forecasts much higher (£35K @4%, £39K @5.5% and £46K @8%).

I’d like to keep paying the endowment but only if I’m very likely to get £32K or more?

turbobob

How these projections work is that they take the current value of the policy and project it forwards using assumed investment growth rates (4%, 5.5% and 8% per year in your case), allowing for future premiums and charges. The next time a projection is sent, if the investments haven't grown by the assumed growth rates, then the figures go down.

As all your figures went down, this suggests that the investments did not grow by 4% p.a. over the last two years. This is not entirely unexpected as worldwide stockmarkets fell by over 50% from late 2007 to March 2009, but have recovered some of their losses since then. Your projected figures now are probably a lot better looking than if you'd had them this time last year!

Managed funds typically invest in a mix of shares, property and bonds, so the performance will depend on how these different asset classes do over the next few years. The "mid rate" (5.5%) is supposed to be a realistic estimate for long term growth. But at the end of the day no one can really predict how markets are going to do over the next few years.

This is a FP managed fund but it might not be the exact one you have, but it at least gives you some idea of how its performed over the last few years. http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=FPPMMX&univ=N