Lifetime Security Plan

4richa4pora

My wife and I took out a joint 'Assurance Lifetime Security Plan' in 1995 with Company 'X' to help compensate our children for any IHT tax which may become payable on our estate/s.

Life assurance benefit on second death is £105,000 - payable outside our estate to our two sons. This is not a with profits policy and benefits are fixed, so £105,000 may not amount to much in real terms when the second of us passes away (hopefully 20 years plus from now).

The plan was written in 10 policies with each one requiring £2.50 per month premium and with a sum assured of £10,500. The combined monthly premium was therefore initially £25 per month and the combined sum assured £105,000.

At the point of sale we were told that this product was rather like filling a bath with money during the early years (when £105,000 of life cover would initially not require that size of premium) and that as premiums became more expensive they would be able to draw on the cash (Managed units) which had built up in the bath. The linked Financial Adviser also said that it was quite probable that the money in the bath may be sufficient to cover the remaining total premiums for the life cover element by the time the youngest of us was 65. I asked X Assurance about this today and they say that they now project on the basis of the client paying premiums FOR LIFE.

Some years later, 'X Assurance' informed us of a problem with our plan, and to compensate for the problem they now make a top up payment into our plan each month, which is currently approximately 80% of our own monthly payment.

We are now at the time for a five yearly review. The plan has a value of £12,500 today (units in their Managed fund) and can be surrendered for this without penalties. With market conditions as they have been recently this value compares reasonably favourably with the premiums we have paid, especially when one considers that we have also had life assurance of £105,000 throughout this period.

We are now approaching 60 and are gradually deliberately decreasing the potential IHT payable on our estate/s, so the £105,000 may not be required for that purpose, but it would still be of use to our family.

'X Assurance' have now completed a five yearly review and inform us that we need to pay £54.08 per month to keep the same benefits (£105,000) in place and they will make an additional monthly payment of £41.50 per month to compensate for the earlier problem with the plan.

I am concerned that we have no control over the monthly premiums and that they may be increased to much higher levels in later years thus proving too excessive for the surviving partner to pay. Cancellation of the policy would then loose the £105,000 final death benefit, and presumably the value in Managed fund units would have been consumed by the premiums.

Now for the questions:

1. Does paying £54.08 per month (and probably considerably more as years pass by) seem a reasonable way of leaving £105,000 to our family on second death?

2. Does the extra £41.50 per month which 'X Assurance' are paying into this product maybe increase the viability of this plan to a point where we would be silly to consider cancellation?

3. Should we cut and run, thus immediately releasing £12,500 to our two adult children.

4. Is there maybe a better way (without the uncertainty of increasing premiums) to produce £105,000 payout to our family on second death?

Thanks!