Non Qualifying Endowment: Question/Advice

EalingSaver

I have a Freedom for Homebuyers endowment policy with Guardian Financial Services. It has been running for 18 years, another 7 to run. The mortgage for which it was originally taken out is fully paid off (just as well as not a snowball in hells chance of this ever being sufficinet to cover the mortgage). Needless to say it has performed pretty poorly....Currently considering what to do with it.

This is NOT 'with profits'. It is non-qualifying. It currently has a surrender value of approx £21k. I have been told that at current value it has a chargeable gain of £3k.

Q: If I was to cash this in, is this charged as capital gain or income ?

Q: Given that this is not a with profits, is there any benefit in looking at whether I could sell this on? (I understand a better price can sometimes be had by selling on rather than surrendering?)

I'm currently considering my options on e.g. continue to run and contribute, freeze payments but leave, surrender.

I am currently a higher rate taxpayer. I will not be retired by the time it matures so would expect to still be a higher rate taxpayer.

Given expectation that there could be a change in CGT rates the above consideration could make a difference to my thinking and timing.

dunstonh

Q: If I was to cash this in, is this charged as capital gain or income ?

Income.

Q: Given that this is not a with profits, is there any benefit in looking at whether I could sell this on?

there is no third party market for unit linked (they have a daily value so why pay more?)

I am currently a higher rate taxpayer.

So you would pay 40% of that chargeable gain.

Why it is a non-qualifying policy? Mortgage endowments were typically qualifying policies. Have you broken the qualifying rules at some point and rest the counter?

EalingSaver

dunstonh wrote: »

Income.

Thanks.

dunstonh wrote: »

there is no third party market for unit linked (they have a daily value so why pay more?)

That is what I expected. Thanks for confirming.

dunstonh wrote: »

Why it is a non-qualifying policy? Mortgage endowments were typically qualifying policies. Have you broken the qualifying rules at some point and rest the counter?

No, I haven't.

And yes, that is what I've just realised on some web searching since my post. And I'm thinking the same flaming thing. If the bulk of endowments were qualifying, why would I have a non-qualifying? Pay an interest only mortgage out of taxed income, pay contributions into the endowment out of taxed income, and then be charged tax on the growth of the endowment.

dunstonh

Its very strange. I have never come across a non-qualifying mortgage endowment.

Guardian Financial Services did do some that allowed alteration of premiums and that would reset the timer for qualifying if you changed premiums. However, I cant see any benefit of having a non qualifying one. Have you queried why its non qualifying?

EalingSaver

dunstonh wrote: »

Its very strange. I have never come across a non-qualifying mortgage endowment.

Guardian Financial Services did do some that allowed alteration of premiums and that would reset the timer for qualifying if you changed premiums. However, I cant see any benefit of having a non qualifying one. Have you queried why its non qualifying?

I have never changed the premiums. Don't know whether the policy allowed me to or not, but certainly haven't done so.

I have yet queried why its non-qualifying.

Until today had not realised that I was sitting in an abnormal position. Becoming bl***ing obvious that this was a pretty ropey vehicle for funding a mortage repayment (in sense of more so than most endowments). Ummm.

turbobob

Any alterations at all? I think things such as adding or removing a life assured, altering the term or sum assured, having the policy made "paid up" and then re-instating it, can potentially affect the qualifying status.

EalingSaver

been away for the BH and yee hah never opened up the laptop once.

no to all of that. Must have been non-qualifying from the start. Certainly seems like I should be going back to GF and asking "why the h**l do I have a non-qualifying endowment".


Would seem to me the best strategy is to cash it in as fast as possible, before the chargeable gain increases, and then look at e.g. investing the proceeds inside a pension wrapper (thereby getting tax relief back).

ffacoffipawb

EalingSaver wrote: »

Certainly seems like I should be going back to GF and asking "why the h**l do I have a non-qualifying endowment".

Do you mean "non-qualifying" or "non-profit"?