Endowment Dilemma

Thrugelmir

moany_mum wrote: »

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.

What's the current terminal bonus rate?

That should give a good indication as to its final value.

moany_mum_2

Thinking of getting some advice from an Ifa before we do anything else. Its all a bit too daunting!

moany_mum_2

Hi Thrugelmir, sorry didn't see your post before responding. Just had a mega long conversation with friends prov where i asked the question re current terminal bonus. Was told that if said policy was maturing today the terminal bonus rate would be 55% of the final bonus which is £8,279. However these have fluctuated greatly over the years from 30% in 07 to 17% in 08 and are at 55% at the moment. Hope this makes sense to you because I'm at a loss! To make matters more complex they mentioned the possibility of selling the policy on, will look into this too .

Thrugelmir

I would wait for the policy to mature on the basis of the figures quoted.

Then use the proceeds to reduce the mortgage.

JimmyTheWig

Surely at this late stage it's worth holding on and waiting for the terminal bonus, isn't it?

moany_mum_2

Thanks to you both, I would agree that this would seem the logical thing to do given its return. My only concerns lie with the current markets and the affect of any further euro calamities or god forbid a double dip recession! Either of these can seriously negate any gains made, without a crystal ball its hard to know what to do for the best.

knightstyle

You have nothing to loose if you contact a broker and ask how much they will pay you for it now. We sold our endowments years ago and got a great deal but the market has changed for the worse now. But it will cost nothing to find out.

moany_mum_2

Thanks knightstyle, I have spoken to a broker today and he informed me that because of the short life left (matures Oct 2012) it's unlikely anyone will be interested in buying it as there's nothing in it for them.

Froggitt

I would still like someone knowledgable in this area like dunstonh to explain how 25yr policies in a strong fund are in deficit (even with demutualisation added bonuses), and a 25yr policy in a zombie fund is in surplus.