Royal Life Endowment Surrender opinion

garthdeeloon

Bit of of a dilema here. I have a Phoenix (Royal Life) low cost endowment maturing in august 2014 costing £71 pm to cover a mortgage of £50k. The mortgage ends its current fixed period next month and I had made the decision to surrender the endowment ande repay the mortgage. Having received the surrender quotation of £32k and reviewed the figures I am having second thoughts. This is because the surrender value has leapt from £23k in early 2010 to 32K now which seems to be a very good return. In fact it has increased by 3k in the last 5 months since my last quotation.
Based on the warnings received since the late 90s I had accepted that there would probably be a shortfall of around 25k so these figures are a pleasant surprise.
Sorry to be long winded !!
My question is, does anybody out there have an explanation for this recent increase and is there any liklihood in your opinion of a similar increase over the next 2 years if I hold on till maturity.
Many thanks for any opinions offered.

garthdeeloon

Nobody got any thoughts on why this increase has occurred ?? My own research has found that Phoenix increased the annual bonus from 0.25 to 1 last year but that obviously would not account for the rise and although i've searched I cannot find anything about rising terminal bonuses. By the way can someone confirm my assumption that I am allocated a proportion of the the terminal bonus when i surrender early.
Hears hoping for a reply this time, Thanks.

garthdeeloon

No response received so I just thought I'd update you with what i've found since the last in case anybody else comes on with a similar query. Searching thru various articles about Phoenix I found a report in an IFA newsletter last year that Phoenix were allocating 'heritage' assets to various funds which would be distributed in the form of a final bonus. This does not seem to have been widely reported and I received no notification from Phoenix about this. If anybody out there could expand on what went on there I'm sure there might be a few interested parties.
I later spoke to Phoenix to get details of what final bonus was applied and how it would have been reduced in my surrender valuation. He confirmed that a final bonus rate of 43% had been used in the calculation and that this would have reduced to allow for the 2 years of premiums not paid but he could not tell me exactly how. The bonus calculation was based on a guaranteed 15300 plus bonuses of 8664 (23964). Adding on the 43% final bonus gives a sum of 34268 which is what I presume I would get if the 25years was up now. This is a difference of 2250 from the surrender value quoted now.
Paying 70pm for 2 years would cost me 1680 to potentially gain the difference assuming that the final bonus remains the same and not allowing for the few pence that annual bonuses may or not add.
Anybody taking the trouble to read this excuse me for the long-windedness of this. I am basically writing down what I think is the situation to clarify in my head what is the best option i.e. surrender now or hang on. I have given up expecting any response on here and the cost of getting IFA advice I don't think would be worthwhile as the question is basically whether the final bonus rate stays as it is or not and I assume that a financial advisor could not advise me on that.

McKneff

Sorry you have had no responses, it really is unusual that not one person can help.

However, thank you for the update, like you say, it may help others.

Good luck

Dick_here

Also you need to factor in the cost of replacing £50k of life cover at your age now.

If the surrender values has gone up by 9k in the last 2 years then your calculation of the final maturity value could be well out, you just don't know that of course. Taken on face value though, is there another investment that you could pay £70pm in for 2 years and get £2250 back ? I doubt it, and you're getting the life cover included.

magpiecottage

!!!!!!_here wrote: »

Also you need to factor in the cost of replacing £50k of life cover at your age now.

£50K life cover would not be needed as £32K would come off the mortgage.

Also, the existing cover is only for two years. The cost of replacing that, if the OP remains in good health, will quite modest - far less than for a 25 year policy for somebody 23 years younger than him.

For two years, though, it is probably worth sitting tight. If I knew for certain though I would win the lottery tonight.

garthdeeloon

guys/gals Thanks for your helpful comments.