Cashed in My Standard Life Endowment!!

Dithering_Dad

absolutebounder wrote:

Sorry my error on the term of Standard life shares was in the wrong area of Iweb however 25% growth since july Is that bad for less than a year?

No, the increase has been pretty good, though that was probably due to the discount and the low rate they were originally sold at. Had they demutualised at the height of the stockmarket, my returns would have been even greater. The future gains of their shares will be dependant on their future performance and I for one have been unimpressed with their peformance with my "investment" thus far. I won't be buying additional individual shares in SL so what is the point of holding onto these once the free shares have been issued?

absolutebounder wrote:

The endowment is not that old so its performance would not be expected to be that good yet as the early premiums are loaded for the charges. If you have 21 yrs to go on the mortgage that means the endowment would have taken a big chunk out of it in say 12 yrs time leaving you with a smaller mortgage and used to paying much larger premiums so you would then be in a good position to overpay a lot for the last few years thus reducing the term.

The endowment was half way through, should I have waited a further 13 years to prove to myself that I had been sold a pup, or cut my losses now? I can start taking a large chunk out of the mortgage immediately by using the money from the cashed in endowment (and save 12 years of future interest payments) and then take small monthly chunks out of it by using the endowment premiums to pay off the mortgage directly.

absolutebounder wrote:

As for life assurance you say you are saving money but you only have a decreasing term assurance. All that does is pay off the mortgage so if you or wife are unfortunate to die at say year 20 you get just a few grand. For a few pence more a level term is much better plus it would have been less if you still had the endowment.

If I or my wife die (or get a critical illness) the mortgage will be completely paid off by the decreasing term insurance, that's what it's there for. We also have additional life insurance through our respective employers that will pay 4x our salaries if we die. How much more life insurance do we need??

absolutebounder wrote:

"If the financial institution I have my ISA with performs poorly, I can always move it - not true of my endowment. Good money after bad? No thanks"

Anybody would think that there are no charges on changing ISA's. You can usually switch the investment of an endowment i believe. Plus are ISA's really doing well. Are the tax breaks really that good?

I'm a high rate taxpayer, so the combination of ISAs and offset mortgage really pays for me. The flexibility of being able to "vote with my feet" with any financial product (even if there are exit fees) far outweighs the frustration of watching an investment die on its feet and STILL having to pay good money after bad into it and not being able to leave it. And no, you can't switch the investment of an endowment - my money was invested in the With Profits fund, I asked if I could move to a better fund and was told that it was not allowed.

absolutebounder wrote:

Only time will tell but I guess your cashing in of the endowment and throwing away the shares was probably not a great decision.

I'm hardly throwing away the shares, I'm just cashing them in at the point that I feel they have made the largest gains and where the benefits from free shares has ended. Is your investment strategy to buy shares and hold onto them forever?

As far as you "guesses" are concerned. Yes, you are guessing, just as I'm guessing that With Profit polices are dead duck investments and that my money will be better invested elsewhere. Who knows who is guessing correctly?

absolutebounder wrote:

If you have nearly 22 yrs to go on a mortgage and have had an endowment for about 13 yrs you are not doing too well on the financial planning front

Not sure how you formulated this argument? Why would this point to me not doing well on the financial planning front? I bought a house in 1995 with a 25 year endowment mortgage. I sold it some years later and bought a much larger house but this time with a 25 repayment mortgage (having learned my lesson about endowments). Why does this point to poor financial management on my part - having a house, then moving to a bigger house???

absolutebounder

You are a higher rate tax payer and you threw away a qualifying policy? I have never been a high rate taxpayer yet paid off my first house (3 bed south england) in 15 yrs despite having a family and an endowment These days I am worth well over the million and invest in property and shares both of which have good and bad times. But the one thing I dont do is sell unless the investment has hit its target purpose. So I wouldnt sell an endowment which I had paid a load of charges on until it matured or paid off the mortgage.
Apart from the professionals like DunstonH there are many financially inept people on this board and so it is likely that by taking their advice or acting in the same way as them you will also be financially inept. I would believe the advice of Dunston H over someone like Edinvestor anyday.

Dithering_Dad

absolutebounder wrote:

You are a higher rate tax payer and you threw away a qualifying policy? I have never been a high rate taxpayer yet paid off my first house (3 bed south england) in 15 yrs despite having a family and an endowment These days I am worth well over the million and invest in property and shares both of which have good and bad times. But the one thing I dont do is sell unless the investment has hit its target purpose. So I wouldnt sell an endowment which I had paid a load of charges on until it matured or paid off the mortgage.
Apart from the professionals like DunstonH there are many financially inept people on this board and so it is likely that by taking their advice or acting in the same way as them you will also be financially inept. I would believe the advice of Dunston H over someone like Edinvestor anyday.

Tut tut, now you're just trying to validate your ramblings by associating them with someone who talks sense. It won't wash I'm afraid.

Well done for being a "millionaire", but not really sure how this is relevent to my having cashed in a poorly performing endowment policy?

I asked Dunston about the endowment a while back and he said (and I quote) "With Profits is largely obsolete nowadays and has become a niche fund". I decided (on my own) that in my circumstance (of which you know nothing, yet have decided to pass judgement anyway - astute financial planning on your part? No.) it was advisable to get rid of an investment that I no longer had any faith in. End of.

Mr_helpful

Maybe Absolutebounders not that daft this just came through regarding Std Life



• EEV operating profit before tax up 55% to £614m (2005: £395m).
• New business contribution before tax up 521% to £205m (2005: £33m).
• IFRS underlying profit before tax up 272% to £540m (2005: £145m).
• EEV up 11% to £5,608m (2005: £5,048m including IPO proceeds), equivalent to 258p per share.
• EEV cash generation increased to £262m (2005: £17m outflow).
• Dividend of 5.4p in respect of period since IPO.
• Heritage With Profits Fund Residual Estate increased to £1.3bn (2005: £0.5bn).
• Continuous improvement initiatives to deliver additional cost benefits of £100m per annum by 2009.
Group Chief Executive, Sandy Crombie, said:
“We have achieved a strong improvement in our financial performance in 2006. Our strategy of concentrating on higher margin and less capital intensive products has delivered strong growth in new business volumes and profitability.
Notwithstanding this strong progress, there is more we can do to increase the efficiency of our operations and to deliver further earnings growth and higher returns. Today we announce the next phase of our continuous improvement strategy, which will deliver a leaner and fitter Standard Life.
These initiatives are in addition to the targets announced at the time of the IPO and will enhance our ability to grow profitably in the medium term. We are on track to achieve our return on embedded value target for 2007 of 9-10%, and increasing thereafter.”

EdInvestor

The people who make money out of life assurance are the shareholders, not the policyholders.Many old Standard Life customers are getting to to see this principle in action quite clearly now.

If I were Dithering Dad, I'd junk the endowment but hold onto the shares.

Dithering_Dad

UPDATE!!!

I cashed in my endowment as planned and paid it (£10700) into the interest only portion of my mortgage, reducing it from £37,000 to £28,300. I also started paying the endowment premium (£66) straight into the interest only account.

I then went to this site and calculated how it would affect my mortgage.

Because of my above changes, the part of my mortgage that should have been covered by my endowment will now be paid in 8.9 years instead of 11, saving me £2705.25 in interest payments. What a fool I was for cashing it in

JoeK_3

Dithering_Dad wrote: »

UPDATE!!!

I cashed in my endowment as planned and paid it (£10700) into the interest only portion of my mortgage, reducing it from £37,000 to £28,300. I also started paying the endowment premium (£66) straight into the interest only account.

I then went to this site and calculated how it would affect my mortgage.

Because of my above changes, the part of my mortgage that should have been covered by my endowment will now be paid off 8.8 years early, saving me £9476.82 in interest payments. What a fool I was for cashing it in

What have you done about the life insurance that you have lost? Don't forget to put that into your calculations.

Sorry to shatter your celebrations!

JoeK

Dithering_Dad

nope, I am ready for that question:)

I took out the mortgage when I was a single guy. I then got married and my wife had to take out term life for herself to cover the endowment amount. We then bought another house and took out joint reducing assurance to cover the additional mortgage amount.

By cancelling my wife's term life assurance and our joint reducing life assurance and instead getting a joint reducing policy to cover the mortgage (minus the £10700 overpayment) we have a cheaper policy.

Celebrations unshattered, my dear schadenfreund.

Also, before you go on about term being better than mortgage protection...

We have life assurance through our respective companies, so the mortgage protection (which also has critical life cover) will cover the mortgage (that is what it is for!) and the employer life assurance covers everything else!

Mr_helpful

Sorry DD but that is not really enough. if you or your wife were unforunate enough to die you have the mortgage paid off and then have the life assurance to live on but employers assurance is rarely more than 4 yrs basic salary quite often only 2 yrs. which is unlikely to be enough given the surviving partner will probably have to give up work to look after the kid(s).
Also remember that while there is limited widows allownce from the state there is no such thing as widowers allowance.
Your endowment was equivalent to a level term policy as far as life assurance is concerned.

Dithering_Dad

Mr_helpful wrote: »

Sorry DD but that is not really enough. if you or your wife were unforunate enough to die you have the mortgage paid off and then have the life assurance to live on but employers assurance is rarely more than 4 yrs basic salary quite often only 2 yrs. which is unlikely to be enough given the surviving partner will probably have to give up work to look after the kid(s).
Also remember that while there is limited widows allownce from the state there is no such thing as widowers allowance.
Your endowment was equivalent to a level term policy as far as life assurance is concerned.

*sigh* the endowment life assurance was for 38k, for my death only. If I had kept the endowment going, it would have paid off the 38k interest free part of the mortgage and my wife would have had £10700 from the endowment to herself. Had my wife died, the life assurance provided by the endowment would have given us zip!