Friends Provident Endowment Advice

Bert_Fry

Hello,
Can anybody give me some advice on what to do next with my pathetically performing FP endowment?
It has a target amount of £34,000 due to pay out in Feb 2013 and my most recent assessment tells me that its projected minimum cash sum at maturity is £18,231.61. What as kicked me into action is the fact that depite paying £50 per month, last years projection was £18,215.31 - a £16 gain in 12 months for a £600 invesment in a bouyant market! Current declared bonuses are £6,535
I guess my three options are
a) Stick with it and hope for the best.
b) Stop payments but keep the policy (paid up?).
c) Sell up and invest elsewhere (but don't have a clue where). Current surrender value is £13,450.
Its a With Profits policy and current projections for the policy are £21,000 @ 4%, £22,900 @ 5.5% and £26,100 @ 8%. It also says that 'depending on investmet experience' there may be a final bonus at maturity.
If I've missed anything important out please let me know.
Many Thanks

sweetmoneysaver

Hi,
I sympathise as I also received a shortfall red alert letter from FP this week. The important thing to also consider in your decision is the life insurance element of the plan. If you shut it down don't forget to have some other cover to pay the mortgage. Youshould be able to get this elsewhere fairly cheaply but don't forget to arrange it if you do close it. Whatever you do DON'T increase your monthly payments. I am trying to re-mortgage and will over pay or change some of it to a repayment to give me a bit of piece of mind. Have you tried to make a mis-selling claim? I haven't yet ... know I should!!!!

Bert_Fry

Yes,
I successfully claimed a couple of years ago. If I recall correctly it was about £2,700.

sweetmoneysaver

I really should get on and do it! Did you invest the money to help with the shortfall? Are you able to overpay your interest-only mortgage as that may be another option if you want to keep the endowment. I'm also confused about what the final bonus is on the FP product but I do recall that this bonus would be the largest one and therefore may be the thing that boosts the investment.

sweetmoneysaver

Does anybody out there know what % a final bonus is likely to be . Has anybody recently gone full term on a Friends Provident with profits endowment?

dunstonh

FP offer unit linked funds on many of their endowments and the ability to switch. These funds can offer better potential and switching may be a viable option.

EdInvestor

Bert_Fry wrote:

Its a With Profits policy and current projections for the policy are £21,000 @ 4%, £22,900 @ 5.5% and £26,100 @ 8%.

You don't say what interest rate you are paying on your mortgage, but let's say you surrendered the endowment and used the lump sum to reduce the mortgage size and then increased the monthly mortgage payments by the amount of the endowment premiums.

If the mortgage interest rate was 5%, at maturity your return would be 22,215. If 6%, you could expect 23,399.

As you can see you are not receiving any risk premium for holding this endowment, and the FP WP fund is expected to return only around 4% long term. So looks like time to dump the policy. Don't forget to replace the life cover beforehand if that's the way you decide to go.

maninthestreet

I'm in the same boat with my FP Endowment - pay in £50.60 per month, bonuses added this year £17 and a few pence; same story for the year before. Even at 8% p.a return, it's going to fall about £10,000 short of the amount required to pay off my mortgage - complete and utter pants!
Strangely, the surrender value has increased by just over £1000 each year for the last 2 years - at this rate, the surrender value will exceed the actual value of the policy in about 9 years time, and the policy still has 12.5 years to run. I don't think I'll wait that long thought, time to bail out of this 'investment' and convert my mortgage to repayment ASAP.

Fruitcake

I'm also in the same position with my FP policy; bonus increase annually is less then my monthly premiums. I'm not sure about the final bonus but I am about to find out at the end of March when my policy matures. I was always under the impression that the final bonus is not guaranteed but always hoped that: -
1) there would be one
2) it would cover some if not all the shortfall

I have two other under-performing FP endowment policies as well so next months result will determine my subsequent course of action.

I will post my findings when I receive the payout so watch this space.


Fruitcake

You Only Listen To Me When I'm Wrong

maninthestreet

Fruitcake - when did you take out the policy that matures next month - 1982?
How much was it for, and how much are the monthly premiums?

Fruitcake

maninthestreet -

Yes, 1982.
₤15867
₤21.06

Fruitcake

You Only Listen To Me When I'm Wrong