My Friends Provident endowment matures, the figures

Fruitcake

I received a letter from Friends Provident today telling me how much my Endowment Policy will pay out… on All Fools Day. How apt.

The policy ran from 1st April 1983 and matures on 1st April 2007. For several years I’ve been getting the well known “shortfall warning” letters with predictions based on 4%, 6%, and 8% growth. In addition, the last few annual statements have shown a yearly increase in payout of less than my monthly premiums.

When it started, the amount it was meant to cover was £15867, with a monthly premium of £21.06. I haven’t checked the vaults yet by I vaguely remember something about a tax allowance which effectively increased the amount paid to FP by a couple of Quid.

So, after 25 years, this is what I should get back: -

Sum assured £6204.00
Declared bonus £6761.83
Final bonus £2299.02

Grand total £15264.85

Shortfall £602.15

Not a complete disaster, but not as good as I had hoped.

Original Mortgage in 1982 was a bog standard repayment type for 19k. Changed it to an endowment in 1983 when I got engaged to Mrs Cake. Over the years I borrowed more for home improvements, eventually settling with a Woolwich part and part Offset mortgage totalling 37k. Interest only part is 27k, repayment part was 10k, now reduced to 5k in 5 years.

The plan is: -

1) Pay off the remaining 5k repayment part and cancel the associated Life cover
2) Pay off another 17k using the rest of the endowment payout supplemented by 7k that has been quietly building and offsetting for this very purpose.

This will leave me with a mortgage of 10k to be paid off in three years time. Predictions are that the other two smaller endowment policies I have will more than cover this even at the current abysmal rate of performance.

Hopefully this info is of use to other FP endowment policy holders.

Fruitcake

You Only Listen To Me When I’m Wrong

dunstonh

When it started, the amount it was meant to cover was £15867, with a monthly premium of £21.06. I haven’t checked the vaults yet by I vaguely remember something about a tax allowance which effectively increased the amount paid to FP by a couple of Quid.

Life Assurance Premium Relief - LAPR. A 1983 policy would have LAPR for the life of the plan although the Govt(s) reduced the rate you got over the years.

Not a complete disaster, but not as good as I had hoped.

True, although you benefited to lower monthly costs than a repayment mortgage (both through LAPR and MIRAS to some extent). So, over the term you have probably ended up paying less than a repayment mortgage.

Hopefully this info is of use to other FP endowment policy holders.

A lot of FP plans have the option to switch funds and moving from with profits to unit linked, if available, can easily end up being the best option as FP's with profit fund is low potential but they do have some good unit linked funds offering much better potential.

martin1018

Thanks fruitcake,

My FP endowment matures on 8th July 2008, currently the numbers are

Sum Assured £9192.00
Current Bonuses £9152.22
Final Bonus ?..I wonder...

This is on a monthly payment of £30.68 and was originally going to pay off the £24,000 mortgage and give a large cash excess as well.

Oh, how we laughed, looking forward to the cruise we could take when the mortgage was repaid....

Thankfully we have swapped some of the mortgage onto repayment so as to cover the shortfall that we will undoubtedly suffer, but at least there is the prospect of a final bonus. Lets be grateful for small mercies.

Fruitcake

dunstonh, thanks for the explanation.
Couldn't get the thanks button to work last night on the company pc, system down for maintenance last night when I got home, and no thanks button on my laptop today. These computers will never catch on you know.

Fruitcake

You Only Listen To Me When I'm Wrong