Yet another endowment Q, quotations attached.

MissScarlett_3

dunstonh wrote:

You still get qualify for a terminal bonus. However, the amount will be lower as you ceased the premiums and the guaranteed sum assured was reduced.

Scot Am plans are actually very good with a success rate of achieving target currently at over 95%. Its a shame you made it paid up.

Looking forward,the only reason to really consider keeping it is the exit penalties. If they are significantly lower in 3 years time for example, holding on to it until then would make sense. If it is an decrease in the penalty by a small amount each time, then calling it a day could be better.

A friend of the family who is an IFA and rearranged our mortgage advised us to make them fully paid up.:mad: He said that is what he would do so I didn't hesitate.

Anyway I shall look forward as nothing I can do about it now, spilt milk and all that. I didnt realise that there was an exit penalty, do I just ask the pru what the exit penalties are and how they reduce, is it a percentage reduction as time lapses. The surrender figures I have been given, are they what I could reasonably expect to receive as they are way above what I have paid in?

dunstonh

A friend of the family who is an IFA and rearranged our mortgage advised us to make them fully paid up.:mad: He said that is what he would do so I didn't hesitate.

You could be one of the 5% and he could have been right. It is also very hard to tell which are the good ones and which are the bad ones. Its a bit easier today as we can see which ones are recovering and which ones are not. A couple of years ago, we couldnt tell that and the safe option would have been to call it a day. It is totally a judgement call where you wont know the best option until you get to the end. He would have made that recommendation based on information then and not now.

Luckily, these types of contracts dont exist nowadays [for new business] and things are a lot easier to review on an ongoing basis and modify when things change. - looking for that silver lining

I didnt realise that there was an exit penalty, do I just ask the pru what the exit penalties are and how they reduce, is it a percentage reduction as time lapses.

This could be why he said make it paid up rather than surrender. If there was an exit penalty for say the first 15 years and you are in year 13, then it would make sense to keep it as paid up until year 15 then surrender it. Pru will tell you how the surrender penalty works if you ask them. Common methods are fixed periods (year 10, 15 etc) or a stepped down penalty (say 100% in first 3 years, 90% in next 3, 80% in next 3 etc)

The surrender figures I have been given, are they what I could reasonably expect to receive as they are way above what I have paid in?

They would be correct for the day you were given them. You shouldnt expect much difference on those (a few pound maybe).

MissScarlett_3

He would have made that recommendation based on information then and not now.

Hmm, I'm sure that must have been the case, I appreciate it's a difficult game to be in;)

Pru will tell you how the surrender penalty works if you ask them.

I shall email them now, cheers.


They would be correct for the day you were given them. You shouldnt expect much difference on those (a few pound maybe)

Looking on the bright side at least I shall be getting more than I paid in :rolleyes:

Happy Christmas to all you wonderful IFA's who freely give your valuable time to help us understand the world of finance :snow_laug

MissScarlett_3

Hi all

Following on from this thread posted some months back I did absolutely nothing!

However I have just requested an up to date surrender value and have been quoted the following-:

Surrender Value Policy 1 is now 10564.00

Possible paid up maturity benefit 12600 4%, 13800 6% 15200 8%

Surrender value policy 2 is now 11950.00

possible paid up maturity benefit 15200.00 4%, 17300 6% 19600 8%

There are no exit penalties. I think that this is a huge increase in 8 months?

My mortgage deal ends in Oct currently 4.39% so am looking at 6ish%

Is it still advisable to surrender and use to repay part of the mortgage, balance currently 120k.

I know I have asked before but does the surrender value include a terminal bonus that I would only get on maturity in 4/6 years?

Gorgeous_George

Interesting figures MissScarlett. Of course, annual returns of 15% could have been lost if you had taken the safe option last December.



GG

MissScarlett_3

Hiya Gorgeous George (are you ;o) )

Well I'm of the same opinion.

You see I totally messed up when I made the plan fully paid up and I don't want to do the same again. Granted it's a hard business that these financial peeps are in. Everything I read says don't cash in a Pru endowment (mine was formerly Scot Am) and even though I did make it fully paid up I was staggered at the increase in projections and surrender value.

Oh to see into the future!!

Leon_W

And there is the rub of it MissScarlett

Nobody has a crystal ball, it could quite easily have gone the other way and the surrender values lower !

In a few years time I bet there will be a rush of complaints along the lines of "If I had just kept that endowment I could of paid the mortgage off early !"

regards

Gorgeous_George

You have to remember that the 'I' in IFA stands for 'I'. Independant means that they look only after themselves - family or not family.

We all need to make our own decisions. By all means listen to advice and 'consider' the views of self-proclaimed experts but, in the end, make your own decisions.

And Leon W, you are most probably right. I'm sure some people feel they were mis-sold endowments and some will have been but it is my considered opinion that most claimed because they could. Many will have sold perfectly good endowments when keeping them may have been a better option. I wonder if the endowment providers will sue the FSA for being forced to pay compensation unnecessarily?



GG

MissScarlett_3

I have often thought that it might not be as bad as it was all predicted to be but then was caught up by the IFA saying that if they were his polices he would make them paid up and the next thing you know, whoosh, paid up they were!

I'm not complaining too much, we paid in approx 10850 in total and the current surrender value is double this, some have done a lot worse, granted a repayment mortgage would have done better. We did have some stressful years though at the thought of how were we going to repay this shortfall that had been predicted?

I was also unsuccessful in claiming even though I have the original literature that suggests that the endowment will repay the mortgage and no mention that it might not. Again I fell at the first hurdle and maybe should have persued it further.

Also, I take your point, I stands for Independant BUT it was of no financial gain for him to advise me to make the plans paid up.

Thanks guys. x

EdInvestor

it was of no financial gain for him to advise me to make the plans paid up.

If he sold them to you originally and you then surrendered them, he would have lost his trail commission.