Should I surrender my endowment policy???

mtbrider1970

Hi,
New to the site and just wanted some advice.
I have a Scot Am(PRU) Home Start endowment policy that is due to mature in Feb 2018. I pay £70 a month for this and it was expected to return £50,000, however I would expect there to be a shortfall in this.
I have a repayment morgage which I overpay every month and never really expected to use the endowment policy to pay off my mortgage just really as a bit of cash when it matured.
After receiving the yearly statement I called for a surrender value which was £18,600 today.
Just wondered what people thought about surrendering this policy now.
Is it worth it? I don't miss the £70 per month.
Is there a better way to use this money now? Not to complicated though:)
Some people's threads on here have said that Scot Am(PRU) policies for the most part are only a few thousand short is this really likely?
My wife and I are both 39 in relatively secure jobs with a good income, however if we could do something better with this money now that would be nice.
Many thanks in advance for any advice.
Regards,
Kev

jockosjungle

Well you could pay off the extra £70 against the mortgage and the cash in as well, maybe do the sums as to what paying an extra £70 will do.

How long have you had the policy for? Have you always paid £70? Hope you've had it for more than 22 years anyway

Sunnyday

I can`t really advise but would like to say that i`ve very recently cashed my policy in and paid it off the mortgage.

In fact it came off the mortgage balance yesterday :j Lovely to see the balance fall so much and the saving on the mortgage interest over the years that it had left to run is rather large, couple that with the bit extra that i can overpay each month with the old premiums and its helping me reach my goal of being mortgage free asap.

I`m not too good with all the workings of these things but its saved me thousands in mortgage interest alone so for me it was worth it.

SD

mtbrider1970

Hi,
Yes that is my thinking, we currently have a 5yr fixed rate with Nationwide which is due to end in November. We borrowed £133,000 and I have overpayed £200 for the last 3yrs. Not sure what to do at the moment when the fix rate ends, I think the with the Nationwide you go onto their SMR if you just leave it.
I have had the policy for 17 years and it matures in 8 years time. It started off around £35 then inceased over the first five years upto £70 which it has been since then. I think it was originally called a low start policy.
Why more than 22 years is this important?
Many thanks,
Kev

jockosjungle

Sorry I meant less than 22 years! That's how much you would get if you paid £70 a month for 22 years would be what you've got now, so it has made some sort of a return for you, especially if you paid £35 to start with.

Its not a great return on your money for having it so long, then again would you be allowed to pay so much off your mortgage without paying a fee?

Personally i would be tempted to cash it in, pay it off (if i could without a fee) and add £70 to the OP

Any idea what the return will be like if you go to term? Have you had a warning letter it'll be a shortfall?

mtbrider1970

Hi,
Yes some warning letters for sometime now.
The latest was December 2009
Projected shortfall:
4% each year 31,200 - shortfall 18,800
6% each year 35,900 - shortfall 14,100
8% each year 41,200 - shortfall 8,800

Good job I am not relying on this to pay my mortgage:)
Not sure what I can pay into my Nationwide mortgage without fees, I think it might be something like £10,000 a year.
What would you advise to do with the rest of the money, ISA's etc.
Regards,
Kev

Sunnyday

Check with Nationwide what happens after the fixed period is up.

My fix with A&L ended 30th June, up until the fix ending i could overpay by 10% per year, after the fix ended i could overpay as much as i liked without penalty hence the whole lot going into the paying off the mortgage. As i said the fix ended 30th June so i checked that the fix was finished then overpaid the lump at the lower rate of 1.5% (the fixed period was 4.99% for 5 years).

HTH

SD

mtbrider1970

Hi Sunnyday,
Thanks I am guessing that made quite a difference once the interest rate changed to 1.5%. I have just checked the Nationwide site and in November I will automatically be reverted to the BMR (Base Mortgage Rate which is guaranteed to be no more than 2% above the bank of england base rate currently this would be 2.5% with unlimited overpayments.
Regards,
Kev

Sunnyday

mtbrider1970 wrote: »

Hi Sunnyday,
Thanks I am guessing that made quite a difference once the interest rate changed to 1.5%. I have just checked the Nationwide site and in November I will automatically be reverted to the BMR (Base Mortgage Rate which is guaranteed to be no more than 2% above the bank of england base rate currently this would be 2.5% with unlimited overpayments.
Regards,
Kev

Hi Kev,

yes it has made a huge difference

I couldn`t have done it until the fix was ended as it would have incurred a penalty so i was counting the days until i could pay it andmade the most of the lower interest rate.. I made sure to tell them that it was a capital payment too so the interest was recalculated immediately. I`ve been playing around with the calculators on here http://www.whatsthecost.com/ and reckon that i`ve saved quite a bit on interest payments.

HTH

SD