Two endowment policies - what do do?

Ali-OK

Hi

I'm in the position that I've got 2 endowments that are no longer needed for my mortgage, as that is all on repayment. Having read as much as I can find on here, I'm not sure what to do with them.

The details are:

L&G 20 yr policy - Unit Linked
Start date: Feb 1996
Maturity date: Feb 2016
Target amount: £28K
Current projections at 4% p/a = £22,700, at 6% p/a = £26,300, at 8% p/a = £30,800
Sept 06 - amber alert with £1,700 projected shortfall at maturity
Surrender value Mar 06: £8872.32
Monthly payment: £70.76

I think I've read that these aren't any good for selling and would appreciate some thoughts/advice on what I should do with this one.

The second policy:

Friends Prov 19 yr policy - With Profits Fund
Start date: Sept 1997
Maturity date: Sept 2016
Target amount: £11K
Current projections at 4% p/a = £7,940, at 5.5% p/a = £8,880, at 8% p/a = £10,700.
Oct 06- red alert with £2,120 projected shortfall.
Note: FP are not applying an MVR to this plan.
Current cash-in value: £2,871.33
Monthly payment: £30.53

My line of thinking has been to sell and/or surrender to help pay off my debts as in my sig, plus it would free up the monthly policy costs too. Life insurance for my mortgage is fully covered.

Apologies for a long post - any advice gratefully received.

chuckles1066

Ali-OK wrote:

Hi

I'm in the position that I've got 2 endowments that are no longer needed for my mortgage, as that is all on repayment. Having read as much as I can find on here, I'm not sure what to do with them.

The details are:

L&G 20 yr policy - Unit Linked
Start date: Feb 1996
Maturity date: Feb 2016
Target amount: £28K
Current projections at 4% p/a = £22,700, at 6% p/a = £26,300, at 8% p/a = £30,800
Sept 06 - amber alert with £1,700 projected shortfall at maturity
Surrender value Mar 06: £8872.32
Monthly payment: £70.76

I think I've read that these aren't any good for selling and would appreciate some thoughts/advice on what I should do with this one.

The second policy:

Friends Prov 19 yr policy - With Profits Fund
Start date: Sept 1997
Maturity date: Sept 2016
Target amount: £11K
Current projections at 4% p/a = £7,940, at 5.5% p/a = £8,880, at 8% p/a = £10,700.
Oct 06- red alert with £2,120 projected shortfall.
Note: FP are not applying an MVR to this plan.
Current cash-in value: £2,871.33
Monthly payment: £30.53

My line of thinking has been to sell and/or surrender to help pay off my debts as in my sig, plus it would free up the monthly policy costs too. Life insurance for my mortgage is fully covered.

Apologies for a long post - any advice gratefully received.

Ok, first of all, no-one will buy the unit-linked one, you'll need to suurender it or make it paid-up.

Secondly, both policies are very young so you're gonna end up out of pocket.

I'd recommend making both paid-up but before you do, try getting a quote for the second one from

http://www.surrendalink.co.uk/

EdInvestor

Hi Ali Ok

Could you post updated surrender values for both policies please. Also, what interest rate are you paying on your new repayment mortgage?

Ali-OK

EdInvestor wrote:

Hi Ali Ok

Could you post updated surrender values for both policies please. Also, what interest rate are you paying on your new repayment mortgage?

Hi

I'm going to phone tomorrow to find out the latest surrender values and will post those then.

Mortgage is on 4.99% - 3 yr fixed.

dunstonh

....or keep the unit linked one running. L&G have some pretty good internal funds and 8% is well within it's potential with most of the funds and/or fund spread.

chuckles1066

dunstonh wrote:

....or keep the unit linked one running. L&G have some pretty good internal funds and 8% is well within it's potential with most of the funds and/or fund spread.

I dont think so!

We had two L & G policies; one was a small one but the main one (to cover our mortgage) involved paying in £1,056 per year.

What convinced me to bail out was, for three years running, their "bonuses" (and they apply two to endowment policies) didnt even cover what we'd paid in.

In other words, we might have well have set fire to the money! Having paid in £1,056 for three consecutive years, our policy was worth less.

L & G are the ****LAST**** people you should invest your money with!

Mind you, their shareholders do rather well out of it all.

dunstonh

I dont think so!

We had two L & G policies; one was a small one but the main one (to cover our mortgage) involved paying in £1,056 per year.

What convinced me to bail out was, for three years running, their "bonuses" (and they apply two to endowment policies) didnt even cover what we'd paid in.

None of which has anything to do with the subject of this thread or the OP.

L & G are the ****LAST**** people you should invest your money with!

I am no fan of L&G but you are incorrect in your analysis of a unit linked contract by comparing it to a with profits plan.

Ali-OK

EdInvestor wrote:

Hi Ali Ok

Could you post updated surrender values for both policies please. Also, what interest rate are you paying on your new repayment mortgage?

Hi again

The FP policy surrender value is £2,900.48

L&G's offices are closed, so will have to make that a daytime call tomorrow and report back!

EdInvestor

Hi Ali OK

Ali-OK wrote:

Friends Prov 19 yr policy - With Profits Fund
Current projections
at 4% p/a = £7,940
at 5.5% p/a = £8,880,
at 8% p/a = £10,700.

If you surrendered this policy and used it to overpay your mortgage @4.99% interest with the lump sum and increased the monthly mortgage payments by the premiums to maturity then you would have an equivalent return of 9,212 at the end.

This is way ahread of the FP estimated value at 5.5%, which indicates you are paying high charges as well as the cost of life cover.

No point in holding onto this one - obviously use it to pay off any debt at a higher interest rate first for an even better return.

Ali-OK

EdInvestor wrote:

Hi Ali OK

If you surrendered this policy and used it to overpay your mortgage @4.99% interest with the lump sum and increased the monthly mortgage payments by the premiums to maturity then you would have an equivalent return of 9,212 at the end.

This is way ahread of the FP estimated value at 5.5%, which indicates you are paying high charges as well as the cost of life cover.

No point in holding onto this one - obviously use it to pay off any debt at a higher interest rate first for an even better return.

Thanks for that - certainly something to seriously think about there.

The L&G surrender value today is £10,419.92. The performance seems to have picked up quite well on this one recently. Interested in your thoughts, but looks like it might be worth keeping to maturity.

EdInvestor

Ali-OK wrote:

The L&G surrender value today is £10,419.92. The performance seems to have picked up quite well on this one recently. Interested in your thoughts, but looks like it might be worth keeping to maturity.

It depends: do you want the matter definitely sorted, or do you want to take a punt?

Target amount: £28K
Current projections
at 4% p/a = £22,700,
at 6% p/a = £26,300,
at 8% p/a = £30,800
Sept 06 - amber alert with £1,700 projected shortfall at maturity

If you cashed it in now and used the surrender value to reduce the amount owed on your mortgage @4.99%, also increasing the mortgage payment by the endowment premium so as to overpay every month, your total return would be 27,954, which is near enough to the target amount.

You're not getting any premium return with this policy for taking a risk.

I would proceed as above and use the other policy to reduce your debt.