endowment advice (opinions?)

driftaround_2

hi all. Long time lurker, but sporadic poster.

After reading various threads and doing some chasing, I would welcome some advice on my position, as i have not been able to glean definitive information.

In 1992, I took out 2 with profits endowment policies. One normal (75.55 pm) with Royal Life, and one lo-cost (£170 pm) with Scottish Provident. These are now all amalgamated into the Phoenix group.

I'm aware of the poor performance of these types of policies in the last decade, in particular being given a 9.40% annual bonus in 2000 and then nothing for the next few years!! Made worse by a guaranteed amount of £26200 (+ bonuses) for a policy to which I will be paying £52k....

Anyway, it appears that the storm may be abating and there is a chance that when my policies mature in 2017, they may not be have as bad a return as previously thought. For instance, I was advised by one of the customer service reps at Phoenix that Phoenix had paid out terminal bonuses of 33% this year, a massive increase on previous payouts.

My question is, does anyone have an idea how Scottish Provident / Phoenix have performed in the last few years? Is it worth me maintaing my contributions till maturity?

Advice will be taken as such, so please feel free to offer your valued opinions :T

jimjames

To get an idea of what it could be worth to sell it on you can check here

http://www.aap.co.uk/

Loughton_Monkey

You are between a rock and a hard place.

I had a Royal policy mature last year (from 1972) and it was actually very good. But most of that had grown up when it was still Royal. When such policies go across to a "Vulture" company, such as Resolution (Phoenix), there are three significant factors:

1. Various actuarial safeguards are in place to ensure that the funds actually passed across are fully adequate and Resolution must comply with "Policyholders' Reasonable Expectations."

2. Resolution would continue to 'manage' and invest the With Profit fund, but presumably in a more 'ordinary' way than maybe the previous company would, since there is no longer any 'marketing' reasons to have high bonus rates. However, this does not mean you are 'screwed'.

3. As part of their general caution, they will pay out very little in reversionary bonus, but leave most of it for Terminal Bonus. This gives them far more flexibility to be 'fair' to each policyholder and is less risky for them.

In my case, the terminal bonus was 106% of the sum assured plus attached reversionary bonus.

It would be typical for Resolution to set its "paid up values" or Surrender Values to very low levels, not least because they have no reason to give you good value and don't ever wish to sell you another policy.

Overall, I would personally suggest that you hang on to them.

Be aware that neither policy will cover the full mortgage debt it was intended to cover. This is not specifically because of any "bad performance" on behalf of either insurer. At the time they were sold, your mortgage interest rate would have been quite high. Bank Base Rate was around 10% at the time, and typical mortgage rates somewhat higher.

When you were sold the policies, it was assumed that mortgage rates would continue to be high throughout the term of the policy. In the event, they have been significantly lower, and your mortgage interest will have dropped tremendously. [Repayment mortgage repayments drop less dramatically, since they include an element of capital repayment - which stays quite high and increases in proportion].

So on the minus side, the whole 'deal' has cost you far less than it would have done if all the parameters had remained roughly fixed for the full mortgage term. But the policy itself will not cover the full mortgage amount.

driftaround_2

Thanks for that.
I no longer have a mortgage, but am considering using the proceeds of the two policies to either buy a property outright, or put down a hefty deposit with a small mortgage.
Exactly the position I would have been in had I still had a mortgage!!

I am inclined to stick with them and am heartened by the 40% difference in the valuation against the surrender value.

I recall a mortgage rate of 15% in 92!!