Thinking of surrendering my endowment

dirk_

Afternoon All

Looking for some assistance with our Aviva Endowment, which I am considering selling/surrendering.

This endowment used to be linked our previous mortgage, but is no longer linked to any outstanding debt.

Info below is from my Feb 2012 Statement

Policy Type Low Cost Endowment, participating in M1 Bonus Scheme 6 Endowment Bonuses.

Start Date.... Feb 1999
Maturity Date.... Feb 2024
Surrender Value.... £ 11558.76

Monthly Payment .... £ 62.00
Sum Assured ...... £ 14538.00
Bonus previously declared.... £ 3619.06
New Bonus.... £ 18.10
Total Bonus.... £ 3637.16

Re the surrender value, is this a roughly guaranteed amount, can I shop around see if I can get a better price, I was thinking of cashing this in a make a one off payment to my current mortgage

Any other info required, I will answer

dunstonh

How much is the mortgage endowment promise? That is likely to be the key difference in the decision to keep or dump it.

dirk_

The original amount for the house was £40k

But it has fallen short, I think a mid range estimate was £28k

dunstonh

Sorry, you misunderstand. Most Aviva endowments have a mortgage endowment promise in that if it falls short at maturity, they will add up to a certain amount to the maturity value. This can be in excess of £10,000. Some only a few hundred. Some didnt get any. So, it is a vital bit of information as if you surrender, you lose that promise value.

dirk_

Dunstonh, thanks for your advice.

Having spoken to Aviva, the MEP is £ 5657.00

dunstonh

If you take the mid rate projection on the endowment and add that £5657 to it then that is good guide to the final maturity amount. The MEP is not included in the projection which is why you have to add it on.

You have £144 payments left. That is £8928 in total.

The current value is £18,175
the surrender value is £11,558
Cost of surrender is £6617 (not including MEP)

So, if we ignore any future growth and assume no more bonuses added, the maturity value would be £23,832 (including MEP)
If you surrender now and add on payments that would have been made then it comes to £20,486.

So, ignoring future bonuses, it will cost you £3346 to surrender this policy.
If you look at your mid rate projection (which is a fair guide) and add MEP to it and then deduct £20,486 from that then you are left with a good guide to what the actual cost to surrender would be.

Without the MEP, the policy would be poor. With the MEP, it turns the decision around and makes it look like a keeper unless you have something specific you would save money on with the surrender value what would recover that "lost money" if you surrender early.

dirk_

Thanks again dunstonh

The mid range projection of 6% - @ £ 34100 + Max promise amount £5657 = £ 39757.00

Will run past her indoors but to me it looks better to leave it as is

dunstonh

To be on the safe side, go by the 4% projection and add the MEP. Aviva is capable of 6% p.a and its closer to their long term average but you just feel they are not quite on the ball with the WP fund anymore and 4% may be more realistic as an example projection. It is a crystal ball job (which is why I also looked at no more bonuses as a base level). However, 4% may be better than 6% as a realistic guide.

dlrob

I've a Prudential endowment - would that have an MEP ?
I've never seen it mentioned in the paperwork I get.
Thanks

Steedski

I have one. It's 23 Yrs old was originally Scottish Amicable.
shortfall predicted about 15K+.
Don't know about MEP?

dunstonh

I've a Prudential endowment - would that have an MEP ?
I've never seen it mentioned in the paperwork I get.

Pru dont have it but then they probably dont need at as more of theirs have hit target than have not.

I have one. It's 23 Yrs old was originally Scottish Amicable.
shortfall predicted about 15K+.
Don't know about MEP?

Scot Am dont. They are not as good a pru originals but not too bad. Shortfalls tend to be small where the exist.