1987 endowment - Is now the time to give up ?

CaptainSensible

I took out an endowment policy in October 1987. At the time the property market was booming and since I was under 21 and needed to borrow over 90% of the purchase price, shopping around involved simply finding a lender who was prepared to offer the finance. The mortagage and endowment were organised for me by the estate agency who sold me the property (yes I know, I am wiser now). I met briefly once with a person who was probably the insurance agent when I had to sign the forms. I cannot recall being given anything that could be considered to be advice.

In fact an endowment was not the best choice for me at the time. With my income and projected future income, a repayment type with early pay off options would have been the best choice. I remember considering it myself, but the mood at the time was that no one was doing repayment ones anymore. The bonus at the end of the 25 years was offered as an incentive and that the pay out would meet the mortgage was an absolute given. It was only some years later that someone told me that this was not the case.

I have written to Phoenix who now manage the policy (it started off with Royal Life and then Royal and Sun Alliance) and they have provided me with the name of the company that were paid the commission. I cannot find any evidence that they are any longer in existence. The estate agency are also no longer.

Since I cannot complain to the financial adviser and I have a pre-1988 policy I assume that I am at the end of the road. Can anyone tell me if this is not the case.

Thanks

CS

EdInvestor

Since I cannot complain to the financial adviser and I have a pre-1988 policy I assume that I am at the end of the road. Can anyone tell me if this is not the case.

I'm afraid not.

Would also suggest that you consider surrendering that policy as it is an RSA one, using the cash and premiums to reduce the amount owed on your mortgage.You'll be very lucky to get a 4% return (think more like 3 or even less) on this policy, whereas the other way, you can make whatever the interest rate is on your mortgage.

If this sounds like a good idea, post some info so we can check there's no hidden advantages in the policy:

Guaranteed sum assured
Declared bonuses
Surrender value
Monthly premium
Maturity date

bernice_2

I need advise on what to do.
I have two endowments(both with shortfalls)
first one is with abbey life (initally a low start)
started 1989 for 42k surrender value £18,544.70
projected shortfall £9100 @6%
second one with zurich adaptable lifestyle
started 2000 for£19,702 surrender value £1,667.77
projected shortfall £202 @6.25%
I have a mini isa started in1999 to help with the shortfall approx £4,740 (awaiting bonuses for this year)
I have a part and part mortgage with Northern Rock(been with them since the begining)
Do i surrender all my endowments and my isa and pay £24,952.47 off my mortgage, and change the remainder to repayment
my total mortgage £115,000 (owe £109,000, £61,702 of this is endowments) or do i let them both continue and continue the isa until the fisrt endowment matures and hope that the shortfall isnt too devastating.
I also have a secured loan with first plus £60,000 but i cant cancel that or else i wont get the premiums back from the ppi after five years of no claimes (thats worth 13,200 alot of dosh!!!) SOMEBODY PLEASE HELP ME !!!

EdInvestor

I have two endowments(both with shortfalls)
first one is with abbey life (initally a low start)
started 1989 for 42k surrender value £18,544.70
projected shortfall £9100 @6%
second one with zurich adaptable lifestyle
started 2000 for£19,702 surrender value £1,667.77
projected shortfall £202 @6.25%

Have you got any maturity projections for these policies?

What are the monthly premiums and maturity dates? I assume they are not With-profit endowments?

What interest rate are you paying on your mortgage?

CaptainSensible

EdInvestor wrote:

If this sounds like a good idea, post some info so we can check there's no hidden advantages in the policy:

Guaranteed sum assured
Declared bonuses
Surrender value
Monthly premium
Maturity date

Thanks Ed,

Details you asked for are:

Guaranteed Minimum Death benefit - £44,000
Declared bonuses as at 08/08/06 - £10,094.49
Surrender value (as at 07/08/06 - not guaranteed) - £21,867.00
Monthly premium £54.44
Maturity date - 18/11/2012

I had not considered surrendering as an option. Since finding out that the endowment would not cover the mortgage I have been paying it off bit by bit anyway. I suppose I should now view the policy as just another investment and shift it where I can get the best return (I think that even my on-line saver would presently be out-performing your prediction).

When I rang about the surrender value, I was offered a written quotation for a "paid up" option where the policy continues, but I don't pay any more premiums. They also suggested that I could sell the policy on a trading market.

CS

bernice_2

i pay abbey life £104 per month.the policy is managed growth investment fund(short and long unit series) Started 11/1989 maturity date 25/11/2014.
Target amount £42,000 projected amount £34,000 at 6%
i pay Zurich £44.20 per month started 1/06/2000 maturity date 1/6/2025.
Target amount £19,702 projected amount £19,500 @6.25%
We are paying £740 to Northern Rock on top, for the rest of the mortgage.
I am paying £50 per month to the mini isa to hopefully reduce the shortfall.:eek:

bernice_2

both of the endowment policies will cough up full amount on death!

EdInvestor

Hi CS

If you surrendered the policy now and put it on deposit @4% also paying in the premiums you should get 32,059 at maturity.

Get a maturity forecast from them and compare with this figure ( use the lowest figure, as their return is likely to be woeful).It should be an easy decision unfortunately.

CaptainSensible

Hi Ed,

Have phoned for a maturity projection and have been given 2 figures:

3.25% - £30,400
5% - £33,400

Have just has a thought however. Can I surrender the policy without renegotiating what remains of the mortgage as a repayment type ? I remember having to provide details of the endowment to the lender. Will they be informed if I cancel it ? I have been overpaying the loan, but I am still technically being charged on an interest only basis.

CS

EdInvestor

CaptainSensible wrote:

Hi Ed,

Have phoned for a maturity projection and have been given 2 figures:

3.25% - £30,400
5% - £33,400

As expected. Depressing stuff, but at least it's pretty clear cut.

Have just has a thought however. Can I surrender the policy without renegotiating what remains of the mortgage as a repayment type ?

Yes.

I remember having to provide details of the endowment to the lender. Will they be informed if I cancel it ?

It may be that the polciy is "assigned" to the lender - they used to do that in the old days.You may need to write to the lender and ask them to "unassign" it .This is routine - lenders no longer require a repayment vehicle alongside I/O mortgages, so they won't object.[Ask RSA/Phoenix if it's assigned, they'll know.If it isn't, the lender won't be informed of the surrender.]

I have been overpaying the loan, but I am still technically being charged on an interest only basis.

No problem: the best way to proceed would be to pay the surrender proceeds off the top of the mortgage, and then boost the monthly mortgage payment by the endowment premium.That will give you a return the same as the mortgage rate - somewhat higher than 4%, I imagine?

CaptainSensible

Thank you so much for your advice Ed.

CS.