endowment - ditch or keep !

spaine

Hi
Aviva has sent us a Red Alert with a large shortfall today.

Wondering if its time to ditch it!

Start Date - 27/10/95
Maturity Date - 27/10/20

Premium - £87.67

Current Value - £27,964.62
Surrender Value today - £16,788.22

Target Amount - £57,395

Projected Values - 4% - £30,600 / 6% - £35,000 / 8% - £40,100

The last three years the projects have gone down significantly.

There is a mortgage promise noted of £2,595 but not guaranteed.

:cool:

dunstonh

Aviva are capable of getting 6-8%. So using those figures are a fair guide.

You have 9 years left costing you just over £9500 in premiums. The cost of surrender is £11,176 and that doesnt include the MEP. So, even if you assume no more growth at all, it is better off keeping it.

if you assume 6% growth then that will be £37,595. Take away the £9500 of premiums due and you have £ 28,095 compared with £16,788 if you take it now.

seems like a no brainer keep.

spaine

Thankyou dunstonh . That makes sense !

I guess it was such a scarey shortfall it was worth asking the question.

dunstonh

Shortfall is bad but you have to look at the position now and going forward from now.

The MEP is fully funded by Aviva to worst case scenario.

tyllwyd

But the figures quoted say that the target amount is £57K and the projected value even at 8% growth is £40K? Will the mortgage promise cover that shortfall or does the OP need to do more?

spaine

tyllwyd .. already realised some years ago that we have to do more to pay the mortgage balance.

Endowment was originally taken out on my first flat, we've moved twice since then.

Current mortgage is around 250k. We're offsetting currently with FD and have a company sharesave scheme / 2 x ISAs / Premium Bonds (a little flutter just in case its our turn ;-) ) and this endowment all adding to the mix.

Currently were working on maxing the ISA allowances before adding more to the ofset as this gives us better int rates.

But didn't want to throw money away on the endowment if it wasn't worth it. if you see what I mean :-)