Unit linked endowment policy - no projections on this years statement?

BlondeHeadOn

I have a joint HSBC Life unit linked endowment, taken out in 1997. I have just received my yearly statement from them, and all they are quoting is the current value of the policy (i.e. what we would get if we surrendered it) - there are none of the usual projections of 4%, 6% etc. The surrender/current value has gone up by c. £4,000 in the last year though. So I started to wonder again if it was worth cashing this in to pay off a lump sum on the mortgage now...

BUT

Dunstonh - I've just read your reply in another thread, can I check this please? (your reply is quoted below)

"Ironically, those that started unit linked endowments in the late 90s, early 2000s will probably hit target and exceed them at this rate as the two big drops have helped them by units cheap and they have time on their side. Unlike those coming up to maturity around now."

Now if that is true, that sounds very good to me - and a good reason to hang onto this policy until it matures in 12 years time?

All advice gratefully accepted, from Dunstonh or others....

Cannon_Fodder

Well there's no certainty we won't be going through the next recession, or the one after that, in 12 years time...

But I'd agree that if you have that long before maturity, we are still recovering from the 2007 'snake' which we'd hope to come out of in the next couple of years, plus you should also gain from the following ten years on top, on average.

I'm holding onto my endowments for 8 years time.

dunstonh

Dunstonh - I've just read your reply in another thread, can I check this please? (your reply is quoted below)

"Ironically, those that started unit linked endowments in the late 90s, early 2000s will probably hit target and exceed them at this rate as the two big drops have helped them by units cheap and they have time on their side. Unlike those coming up to maturity around now."

Now if that is true, that sounds very good to me - and a good reason to hang onto this policy until it matures in 12 years time?

All advice gratefully accepted, from Dunstonh or others....

Investments are unknown. However, what is known is that they go down as well as up on a daily basis. Always have, always will. The example projections assume straightline growth of 4%, 6% and 8%. However, thats not how it works. You will not find an investment out there that does that.

2008 saw a near 45% downturn. 2009 so a near 40% upturn. 2010 is doing nicely so far.

With regular investment contracts, major downturns in the later years can destroy the investment and make it fall short (as we have seen). However, major downturns in the early years can benefit investments that have enough time to recover as you are now buying your investments each month that much cheaper.

You never know when a major crash is going to happen. You know there will be more but how much and when is unknown. 1988, 2001-3, 2007-8 are the last big three. That long gap between the 88 and 2001 was the big problem for most endowments. Too much growth early on, not enough later on. Those taking them around 10 years ago, have virtually no growth in the early period but two periods where prices were well down. So, the potential for those ones for the next 10 or 15 years looks a lot better.

Note the word potential. You are making a judgement call.

Also, with unit linked you usually get a wider range of investments and can usually pick your areas better than many of those older plans. Plus, the later plans tend to have lower target growth rates (how much they need each year average to hit target).

Whilst endowments are mostly obsolete nowadays (S&S ISAs taken over), it is interesting to see that Scottish Widows have relaunched a 10 year endowment for savings. I never thought I would see them again but there must be a market.

BlondeHeadOn

Thank you for both replies. I think I will hang onto the endowment for now and keep paying the premiums - I get life insurance and critical illness cover for both myself and my OH as well with the policy, so I may as well hang on for now.

:T