Selling an Endowment Question

abwsco

Our IFA has told us that he thinks it may be a good time to sell our Pru(was Scot Am) Endowment. We've had it since 1987 and it is due to run until 6/2013.

He's getting details of surrender value etc but what do we need to look at so we can decide if this is the best option for us. Also will he get commission on the sale of it should we go ahead?
TIA

dunstonh

95% of Scot Am endowments hit target last year and 96% is the current projection this year.

If you are falling within that 4-5% then it makes sense to get rid of it and look at alternatives, providing the alternatives are acutally cheaper.

You need to be aware of the costs of the alternatives versus what you have now. i.e. if the shortfall at 6% is £3000 and its going to cost you £35pm to cover that shortfall is that cheaper/more expensive than converting to repayment mortgage and using the surrender/sale value of the endowment to reduce the mortgage. If that option is going to cost you £50pm a more then its best sticking with the endowment. If less than £35, then its better to switch.

Its all about comparing the different options and costs.

You have one of the better with profits funds there so dont go into this thinking the endomwent is bad so must be changed at all costs. It may not be.

chuckles1066

abwsco wrote:

Our IFA has told us that he thinks it may be a good time to sell our Pru(was Scot Am) Endowment. We've had it since 1987 and it is due to run until 6/2013.

He's getting details of surrender value etc but what do we need to look at so we can decide if this is the best option for us. Also will he get commission on the sale of it should we go ahead?
TIA

You can get a surrender value as easily as writing to the Pru and requesting one!

No need for an IFA for that.

The alternative is to sell. A 19yr old policy which has attracted a lot of high bonuses from the late 80's might be a go-er.

http://www.tepexchange.com/

will give you an idea of what you're likely to realise.........

dunstonh

The IFA is unlikely to be doing it themselves (if they are a rep for company and not an IFA then dont use them). If the IFA is just acting as middleman then the company, such as tepexchange, will pay a commision to the IFA. If you go direct, they keep the commission for themselves. (spot the IFA login details on the left of that website).

The IFA will have an advice liability here and should cover various options and cost them up. The recommendation will result in a suitability letter and you will have the protection of the FOS if the advice is wrong. If you go DIY, you will not and it will make no difference to you in cost.

abwsco

Thanks guys. If it's OK I'll post back with surrender value etc when we get them to see what you think.

Have the feeling it would be complicated for us to work out what to do without advice as we have previously swapped mortgage amounts, so we now have £24,000 on interest only (bal is on repayment and another 17 years to go) but have the Scot Am endowment of £30K then another one for £6k which is up 11/2019.

chuckles1066

abwsco wrote:

Thanks guys. If it's OK I'll post back with surrender value etc when we get them to see what you think.

Have the feeling it would be complicated for us to work out what to do without advice as we have previously swapped mortgage amounts, so we now have £24,000 on interest only (bal is on repayment and another 17 years to go) but have the Scot Am endowment of £30K then another one for £6k which is up 11/2019.

The key is growth...............you need to work out how much you've paid in against what they're offering (less a factor for the built-in life insurance).

IIRC, our L&G policies came out at about 7.8% tax free which, given the life insurance element and the fact that most savings accounts in the 90's were paying considerably less than that, was the clincher in us bailing out.