My endowment policy

Coveredinbees!!!!

When we bought our first house in 1999 we took an interest only mortgage with a Legal and general flexible mortgage plan. The plan was supposed to pay out £50400 and we pay in £89.67 a month. So far we have paid in £11567.43 and it's worth £11291.43. The trouble is the charges whip out any increase in unit value so we end up making a net loss, is it really worth continuing with or should we just get out now and stop throwing good money at it?

We moved house a few years ago taking out a one account and have whittled down what we owe to just over £20K so we should be able to half this by cashing in and save on the interest.

Obviously we get the life cover but I can get that for less than £10 a month elsewhere.


Just check the figures and actually we too the policy out in 1998 so we have actually paid in £12645!!!!

dunstonh

So far we have paid in £11567.43 and it's worth £11291.43. The trouble is the charges whip out any increase in unit value so we end up making a net loss, is it really worth continuing with or should we just get out now and stop throwing good money at it?

Breakeven point when on track for a 25 year endowment was typically around 8-12 years. The charges dont impact as you say. They are typically heavy in the early years but much reduced in the later years (this was because endowments were priced for a higher inflation, boom/bust economy - part of the reason why they did badly during the noughties and why some are expected to come back in surplus again).

Its possible the plan is worth stopping but we dont have enough to go on here. Some unit linked endowments can be worth keeping in their later years and L&G offered that type as well as others.

Coveredinbees!!!!

dunstonh wrote: »

Its possible the plan is worth stopping but we dont have enough to go on here. Some unit linked endowments can be worth keeping in their later years and L&G offered that type as well as others.

what information do you need, I've got everything I have ever been sent out here.

dunstonh

Current charges and future charges (future is important as some endowments have increased allocation rates after year 10 or 15 as all they were heavy in the early years)
investment funds you are in and those that are available to you
Currrent value and surrender value
projection values
actual cost of replacement life assurance (and CI cover if included - this tended to be cheap in endowments)
an indication of what you would do as an alternative with the money.

Coveredinbees!!!!

I've found the documents and have been having a read so here goes-

Allocation %

The following proportions of your premium will be used to buy units at offer price in you selected funds

first 24 months 35%

After the first 24 months 103%

Premium £89.67, Sum assured £50400, target maturity benefit £50400, Managed fund.

It says later on in the document that I can switch between investment and indexed funds but I don't know what fund I'm actually in I'm guessing thats part of the management of the fund they do that for you?

The charges are 2% of the monthly premium for life/illness cover and the management charge is 1/12 of 1% of the fund value.

The projections are 4% each year £32,400, 6% each year 40,400 and 8% each year £50,200.

That's all the detail I have right now, if I do surrender I will put the money in to the one account to off set the mortgage interest.

dunstonh

first 24 months 35%

After the first 24 months 103%

See, worth asking as every contribution made now is getting 103% paid in.

says later on in the document that I can switch between investment and indexed funds but I don't know what fund I'm actually in I'm guessing thats part of the management of the fund they do that for you?

They dont do the fund switches for you. Thats your job or that of your IFA if you use a servicing one.

That's all the detail I have right now, if I do surrender I will put the money in to the one account to off set the mortgage interest.

Assuming bog standard balanced managed fund, the long term average after charges tends to be around 7%. However, going forward you never really know what it will be. As its unit linked, it does offer more potential than a with profits one.