Endowment policy query

mjdh1957

Hi everyone!

I've got an endowment policy that was taken out in August 1999 with Abbey Life as security for a mortgage that has been paid off when I sold the property. I carried on paying in and the most recent statement has a surrender value of about £8,500. The insurance payout if I die is just over £49,000, and it matures in August 2019.

I don't have a mortgage now and am unlikely to want one in the future. I live with my partner in his house, and he is intending to be mortgage-free in just over 8 years time.

My question is about my endowment - is it better to keep on paying into it for the full term, or to get the surrender value and then invest it myself? I've had a look at some of the 'We Buy Endowments' websites and it seems they wouldn't want to buy mine.

Thanks!

dunstonh

is it better to keep on paying into it for the full term, or to get the surrender value and then invest it myself?

Abbey Life will offer unit linked funds so the answer to this is could be either. AL tended to have higher initial charges but lower annual management charges. Without knowing the charges and the surrender penalty and if there are any surrender penalty free exit points in the coming years, we cant say what is going to be best.

I've had a look at some of the 'We Buy Endowments' websites and it seems they wouldn't want to buy mine.

That is because yours is unit linked and has a daily value. Older conventional with profits plans had a retained value which was only paid on maturity.

mjdh1957

Thanks for the reply.

No easy answer then. I'll give it some more thought before deciding.

EdInvestor

mjdh1957 wrote:

. I carried on paying in and the most recent statement has a surrender value of about £8,500. The insurance payout if I die is just over £49,000, and it matures in August 2019.

Post your monthly premium and maturity projections and we can take a look.

mjdh1957

OK, from the last annual statement dated August 2006:

Surrender value £8406.76
Death Sum Assured £49400.00
Projected final amount at maturity (August 2019):
assuming 4% growth £40900
assuming 6% growth £49000
assuming 8% growth £58800
Monthly premium paid £153.92

LOST

what's the current fund value and bonus rate(if in a with-profits fund)?

what are the explicit exit penalties and/ot mva?

dunstonh

it will be unit linked. Abbey Life were not a with profits provider. That is why its performing well and the 8% figure is within its potential. They do have a range of funds as well to suit different risk profiles and you can switch between them.

mjdh1957

On the last statement, the fund value seems to be the surrender value, £8406.76.

It's not a with-profits scheme.

EdInvestor

mjdh1957 wrote:

Projected final amount at maturity (August 2019):
assuming 4% growth £40900
assuming 6% growth £49000
assuming 8% growth £58800

If you cashed it in and put it on deposit @4.5% also paying in the premiums to maturity, you should end up with 47,738 at maturity.

If you cashed it in and reinvested the lump sum and premiums in funds which achieved and annual average growth rate of 7.5%, at matuirty you should have 61,519.

The difference is accounted for by the life cover and the charges.There's not much of a risk premium left in this policy, as you can see from the fact that the guaranteed returns at the same rate are higher.

Unless you have a need for the life cover, I'd suggest you find a better investment.

mjdh1957

Thanks for that!

I'll be surrendering it after Xmas and reinvesting it probably in an ISA :xmassign: