Selling endowment - moving abroad

spiritualized

Dear all,
I am in dire need of some expert help to know what to do - here is the situation.
I have been offered last week a job in France (back to the country yay) to start on the 16th of May (!)

We are selling our house with a nice profit (it will be on the market for £125k, bought for less than £60k). It goes on the market this Wednesday.
The interest owed is about £62k, whilst we have two endowment policies, paying about £130/month.
The latest statements Scottish Life sent us in Dec 2010 showed:

Profitbuilder House Purchase Plan

Total Plan Value (1) : £7968.69
Total Plan Value (2): £8200.36

The plan is due to end in Dec 2023.

1- Can I sell/surrender the policy with the house unsold, but on the market ? will this not make Nationwide (the mortgage lender) twitchy ?
This would make a slow sell much more bearable.

2- If I can, what's the best way to go about it ?

3- out of curiosity, considering the sums paid in are about £15,840 and the current value is £16,200 in 11 years, how the heck could this plan ever have come up with £60,000 in 25 years ?

Thanks for your input !!!

Olivier

dunstonh

1- Can I sell/surrender the policy with the house unsold, but on the market ?

yes

2- If I can, what's the best way to go about it ?

If its unit linked you ask the insurer to surrender. If it is with profits and want quick access to money you ask the insurer to surrender. If you dont mind a slower process with the potential for more then you could try to sell it.

3- out of curiosity, considering the sums paid in are about £15,840 and the current value is £16,200 in 11 years, how the heck could this plan ever have come up with £60,000 in 25 years ?

Fairly easily really. at 7% p.a. for 14 year, the existing value would grow to £41,689. For the monthly, I have assumed £100 is invested with £30 going to insurance. Over 14 years at 7% that would grow to £28076. Put the two together and you have £69765. A £9765 surplus.

The typical balanced managed fund has a long term average of just in excess of 7% p.a. after charges So, its not an unreasonable expectation.

spiritualized

Thanks - I do believe this is unit-linked, not with-profits - so surrender it is.

Sorry, I was not clear in my first message - it's £130 total, so about £65 each per month - we pay for life insurance separately, if this is what you meant...
According to my calculations, it brings it down to £61000 or thereabouts, so would still have paid off....sorry if that sounds like a silly question, but why would this investment grow by so little in 11 years ? Isn't 7% optimistic considering the performance of the fund ? Just for intellectual curiosity really

dunstonh

Sorry, I was not clear in my first message - it's £130 total, so about £65 each per month - we pay for life insurance separately, if this is what you meant...

The endowment policy includes life assurance. So, I used £30 of the £130 to cover that as a guess. £100pm was the investment amount i used.

sorry if that sounds like a silly question, but why would this investment grow by so little in 11 years ?

Two stockmarket crashes in a decade of a level that only typically come along once in a generation. It was one of the worst decades on record.

Isn't 7% optimistic considering the performance of the fund ?

you dont say what the fund is (yet). I just went by balanced managed as that is most typical on unit linked endowments. Even if you look at that over the 10 years, it still hasnt fallen that far short of 7% a year average. Indeed, the events of the last 11 years could actually be very beneficial long term. The lack of a crash or two (of more "normal" amounts) during the 90s actually did more damage and led to more endowment failures. Crashes in the early years give a short term drop but a long term benefit. Crashes at the end can be where the damage is. (40% drop in year 2 makes little difference to amount paid in so far as there isnt much on the value. The investments being bought monthly for the next few years are cheaper than before and these grow the most. A 40% crash at the end sees the whole value go down 40% with no time to recover and no time to buy investments cheaper and watch them grow.

spiritualized

dunstonh wrote: »

you dont say what the fund is (yet).

Paperwork shows

50% SL Managed
50% UK Equity

dunstonh

Those funds certainly have 7%+ average potential.

spiritualized

Thank you for your help, it's clarified things a great deal !!!!

Cheers :T