CU Endowment Advice Please

EdInvestor

lolly1963 wrote:

6% £40,000 shortfall £10,000

If you cashed it in now and invested the S/V plus premiums @6% until maturity you would end up with 40,776, so it appears they are projecting including accumulated terminal bonus.(The 776 difference would be accounted for by the life assurance cost.)

BTW do we have a source for this statement that NU "will make up 5k of the shortfall", which I've now seen mentioned a couple of times.

Have they actually quantified the promise in these terms?

dunstonh

No mention of any terminal bonus included in any of the figures.So on the whole this policy seems quite good doesnt it?

Yes. It is normal for NU, Pru (and Scot Am) to have better quality endowments.

They have painted such a poor picture with this red alert business, which quite honestly has frightened me each time i have received one.

They havent. The media has mostly. The regulator hasnt helped either. The problem is that the bad endowments make the headlines. Not the ones hitting target and paying surplus.

To quote the Evening Standard (who appear to have realised this).

...they have fallen victim to well-intentioned but ultimately destructive consumer-driven regulation. Such rules, designed to protect the public, end up depriving people of the very products they ought to have.

I dont know NU's current stats but Prudential endowments havent failed to pay a surplus and Scot Am (part of Pru now) are hitting 96% this year and 95% last year. NU and Pru are very close on the quality of their with profits fund.

If its any help, one of the last with profits investments I split the money equally between NU and Pru. Currently the NU policy is just under £300 higher than the Pru. They are that close to each other. These are the big two on the with profits front.

The projection method is set by the FSA and not by NU. Conventional with profits plans were never designed to work with a daily value to project and most computer systems for these plans were developed over 30 years ago and cannot be changed. They dont operate on windows and cannot be recoded without spending billions in some cases. So, they had to pick a cheaper option and that usually meant either projecting from the surrender value (which is a usually a couple of thousand pounds lower than the real position) or from the current guaranteed position. Both options giving artifical figures.

I wish they could tell it more like it is, after all its our money and when you try and get the correct advice from them, it is just so difficult.

The only person that can give you advice on this is an IFA. If NU were to give advice they could be slapped with a fine, people sacked and de-authorised and even shut down parts of the business.

I can undestand your fustration but you shouldnt blame NU.

lolly1963

Thanks both for your lengthy and most helpful advice.
Dunstonh, no i don't blame NU for not being able to discuss the policy at all.
Perhaps it is just lack of knowledge(on our part) on the real way that these policies perform. I am much clearer on that now, and very tempted to keep hold of the policy now. My hubby and i are quite fortunate in that we switched our mortgage years ago, and being as he is a higher tax payer, would benefit us to keep it, and still keep overpaying on the one account. I think we could clear it in just over 2 years, and so then in another 3 years further have a handsome sum of money tax free to invest further.
Many Thanks again.

EdInvestor

One way of getting a view on whether your endowment is worth keeping is to do as you have done, and seek a sale quote. In this case there is a 14.6% premium.If there's a decent gap between the sale quote and the surrender value, as here, then you may feel you should keep the policy and pocket that extra value yourself.

If it were me I would keep it for the moment and then get another quote after the windfall is paid out.If the gap is then noticeably narrower (with a premium of say 5% or so, then I would probably get rid of it then. If it's still over 10% then it's probably worth keeping it to maturity.

The TEP traders who buy endowments do IMHO have the best idea of how much any individual policy is worth.If they won't give you a quote at all on a with-profits policy, then that's usually a signal to bin the policy forthwith.

lolly1963

Thanks, that is interesting as i approached all of about 9, or maybe even more traders which NU gave me on a list. All of them were not interested apart from one!

EdInvestor

lolly1963 wrote:

Thanks, that is interesting as i approached all of about 9, or maybe even more traders which NU gave me on a list. All of them were not interested apart from one!

Ah.The one that was interested, it's not called "Integrity" is it, by any chance?

lolly1963

Ahem...yes...is there a problem with this company then?

EdInvestor

'Fraid so.Integrity are best avoided.

In that case, I suggest you make one more inquiry.Call up NU and ask them to tell you the investment composition of the particular WP fund your policy is in.

They should give you figures something like this:

Equities A%
PropertyB%
Bonds C%
Cash D%

NU has quite a lot of different WP funds, and some are likely to perform better than others. So really we need to check if the fund you are in is likely to produce a decent (6% type) return, or is likely to be closer to the 4% area, in which case, you might be back to plan A even with the windfall - the size of which we don't yet know.

[Terrible hassle isn't it, I'm sure nobody would have bought these policies if they had any idea how hard it was to establish any factual information about them :rolleyes: ]

lolly1963

Hi,
How come NU would recommend Integrity if there is a problem with them. I thought that they were regulated by the FSA?
Cheers.

EdInvestor

If you do a search of this forum under Integrity you'll find lots of threads about the firm.While it doesn't exactly break the rules, it seems their approach is to offer much more than other traders, including on policies others don't want , but rather than buying the policy from you and selling it on as the other traders usually do, they will want to sell your policy first and get the money before they pay you.

Thus a wait of up to a year is apparently not uncommon.

Their contract also has a feature under which they can charge you a fee for giving your policy back to you if you get fed up with waiting and decide to surrender.This fee can be as much as 250 pounds.

As you can see from the threads, while you may get your money in the end the Integrity experience can be a rather frustrating one, which is less cost effective than it looks.

Have you tries all the companies listed here:

https://www.apmm.org