Endowment Dilemma

moany_mum_2

Can anybody advise re our current (if unexpected) situation? We have an endowment that matures Oct 2012. The target value was £27K, on our recent statement the surrender value was £32,300 the projection at maturity is £34,300. The maturity value is based on the current final bonus rate which is liable to fluctations - should I therefore surrender the policy now and accept the £5,300 profit or wait until maturity and take a risk with the final bonus?

Any feedback gratefully accepted - thanks!

redmalc

Moany Mum,I am in a similar position i have an endowment with Aegon which matures in June 2012,it is impossible to quote the markets day by day at the moment so we have no chance to predict what will happen next year

moany_mum_2

Thanks for responding redmalc. I must admit this is a strange scenario, we have 2 other endowments that are both on red alert so to have this one "on track" is a pleasant surprise. However, given the volatility of the markets at present I'm erring towards the surrendering option.

Froggitt

Was it a 25 year term or longer? I didnt think any 25 year plans from any lifeco were on track, never mind on a £5k surplus.

alibongi59

I'm in the same situation with a 'Phoenix zombie' (formerly Sun Alliance) 25 year endowment due to finish in January 2013; at the moment they are paying a small final/terminal bonus of I think around 9% but in the past they have removed this completely; should I surrender now or take my chances & go full term? any advice would be much appreciated.

moany_mum_2

Seems there are a few of us in the same boat! Mine is a 25yr Friends Provident (was National Mutual) policy. I've scoured the internet for any info and there is nothing re this scenario - plenty regarding my other two red alerts but not this particular one. Going to phone friends prov to see what the pros & cons are but if anyone here has any thoughts I'm all ears!

Froggitt

Ex National Mutual zombie 25yr policies never struck me as outperformers..........are you sure youre looking at the right figures e.g. maybe its the life cover thats £27k and bonuses on top of that take it to a projected £34k next year?

moany_mum_2

Hi Froggitt, on the recent statement it says that its current surrender value is £32,309.45 - am I missing something because it does seem too good to be true!

Froggitt

Im sure the surrender value is correct......its just how much it was expected to return I was querying. eg if the target was £60k and you pay £100 a month, £32k isnt that great. However if the target was £27k and you pay £30 a month, £32k seems quite good.

moany_mum_2

The policy was taken out to repay £27k and we pay £37pm so on this basis this seems a great return. Our dilemma is should we leave it there or surrender it? The projections for growth on maturity (Oct 12) are 4% £33,800 projected surplus of £6,800, 5.5% £34,300 projected surplus of £7,300 or 8% £35,000 projected surplus of £8,000. The letter states that a growth rate of 5.5% is a reasonable assumption. Just dont know what to do as the markets seem to be all over the place at the moment. Thanks.

Froggitt

Yup thats a great performance. Mine is with ScotAm/Pru maturing next year......I pay more per month and my projected maturity value is lower than yours.....so much for stong funds over zombie funds!!!

I guess it depends how much of your returns are already guaranteed bonuses, and by how much the maturity value could fall if its a bad year. I thought that most zombies were in fixed interest gilts etc (eg 1% guaranteed), so even if it goes off a cliff, it wont reduce much, if any. Which is also why Im somewhat puzzled as to how the performance is exceeding the original projections.