Sell or surrender endowment policy

calirose

My husband and I took out an endowment policy in 1993 which is due to mature in 2018. We are in need of some money and feel that our best option is to cash in our endowment as our mortgage should be paid off without the need for the policy. Our sum assured is £10816 with bonuses to date of £2611. We have been given a surrender figure of £11076 but don't know if this is our best option. Also would this money be deemed a taxable income and need to be disclosed for the purposes of tax credits etc?

bigadaj

Not an expert but my understanding is that there isn't really a Market in endowments anymore so surrender would be your only option. I think that once you h ave held an endowment for over ten years then there is no tax to pay, and if you did the sums the amount of increased value may well be pretty low in any case. I would have thought it probably would effect tax credits and benefits but you would be better posting this single point in the benefits section as there are knowledgeable people there and tax credits and the like seem a minefield.

hcb42

calculated projected maturity with current surrender value plus future payments for next six years...how does it look then?

calirose

Our projected final amount only £15400 and we still got five and years to pay, doesn't seem like we going to be much better off if we wait.

holly_hobby

The TEP market is dead - so selling isn't really an option.

Early surrender, or making the plan paid up is.

With regards to taxable returns - you have an in force Low Cost Endowment, with an original 25 yr term (20 yrs having elapsed) and regular (monthly) prems, which means that even if surrendered now it will remain "qualifying" with proceeds paid without any tax liability - so there is no need to worry over that aspect.

However, the receipt of the lump sum may affect your eligibility for any means tested benefits you are currently in receipt of - and lawfully should be disclosed to DWP if so.

Points to note are that surrendering early will forfeit the addition of any (none gted) terminal bonus on maturity - which MAY be a decent sum, may be a piddling amount, may be nil !

You will also lose the benefit of life cover (GDB) that is currently provided under the plan - the replacement of which (over the same remaining policy term ....albeit only 5 yrs !) would be more costly than the prem built into the current policy premium, due to the fact that rates would be based on your current age.

In a nutshell, you must balance the above, with the cost of maintaining premiums over the remaining 5 yrs ( which will be an easy decision if they are no longer affordable). The fact that the plan is no longer a mge repayment vehicle, will lessen the impact of a shorfall to target at maturity, having said that nobody wants to invest capital for little to no return (not withstanding the portion of premium going to fund the GDB element).

If you feel that the life cover is not required, and the % trend of previous and thereby anticipated future reversionary bonuses, are largely negligible compared to the continued maintenance of the plan - well your decision may be an easier one....

Hope this helps

Holly

calirose

Cheers Holly, that was very helpful.