Underperforming Endowment vs Debt repayment

peterpants

At the moment I'm out of work although receiving a gross pension of £1900 a month and my wife earns £500 pm. I have 2 loans with RBS and Northern rock and under performing endowment currently worth £30000 due to mature in 9 years when it should be £60000 plus profits (Aon have refused my request for reparation as they say I did not respond quickly enough and had been given adequate notice). Simply put, should I cash in the endowment to pay off the debts, thus making myself approx £900 a month better off before taking into account any changes to mortgage?

maninthestreet

You havent given enough information about the endowment for anyone to offer advice. What is monthly payment? The £30,000 may not be the current surrender value for the policy, and you would get a lot less if you surrendered it.

peterpants

Payment is £100.40. From the last Yearly Statement (2006) 'Total of guaranteed amount plus all bonuses' = £29539.25, with the caveat that this will be less if cashed in early

dunstonh

Who is it with? that are the surrender values? what are the projections? what is the terminal bonus? is there any other special bonus due or mortgage promise value? is terminal bonus included in the projections? are projections realistic (can be too high but can be too low)? Do you need the life cover? if you intend to replace life cover, how much does that cost?

peterpants

dunstonh wrote: »

Who is it with? that are the surrender values? what are the projections? what is the terminal bonus? is there any other special bonus due or mortgage promise value? is terminal bonus included in the projections? are projections realistic (can be too high but can be too low)? Do you need the life cover? if you intend to replace life cover, how much does that cost?

1. Friends Provident
2. £19394
3. Projection at 4% = £33700
4. None given
5. No
6. No
7. I believe so
8. Yes
9. Not investigated - currently at £60000 +£17500 on my wife, none on me.

peterpants

A little help...?

maninthestreet

If you cash the endowment in, you are going to get £19394, assuming no MVA / MVR is applied (you need to confirm this). Exactly how much debt do you have that wish to pay-off? When does the mortgage have to be paid off, and how much is it (£30,000?) ?

peterpants

MVA/MVR?? And an awful lot of debt I'm afraid. Much more than that £19K. The bank are suggesting that I reduce my debt and go for a straight repayment. The endowment matures (ha!) in 2015.

jamesd

What's the interest rate on the debts that this will repay? That's the return you get for cashing in the endowment.

If the debt is at say credit card 25%, get rid of in the endowment without a second thought. But consider selling it if it's with profits, instead of simply surrendering it, since you'll probably get more money from the sale.