Can I/Should I Reduce Sum Assured?

cymro

I have a Mortgagemaster endowment plan with Abbey Life (Managed Series 4) which I took out in 1987 and matures in 2012. The Sum Assured and Total Life Cover is for £43050.

Is it possible to reduce this amount and reduce the amount I have to pay monthly into this policy? If so to what level would I reduce it to and what would the downside be?

Any feedback appreciated.

cymro

dunstonh

You will almost certainly will not be able to make any changes to the plan now as it will turn it from a qualifying plan to a non-qualifying plan for tax purposes. You would be faced with a chargeable event on maturity if you did.

It would be sensible to review the funds as well. As you get closer to maturity, you should lower the risk of the funds. Whilst this reduces the potential for growth, it also reduces the potential for a stockmarket crash to reduce your value. Something you dont want as you will not have the time to wait for any recovery.

cymro

Thanks dunstonh - I had a quote (still have letter) from Abbey Life a few years ago providing me with the revised monthly cost if I reduced the sum assured but I don't recall the background to this. So it looks like at some point it was possible.

Not sure what you mean by 'review the funds as well' do you mean switch to a better endowment policy?

Regards

cymro

dunstonh

You would have been able to change it during the period when changes would not have impacted on it's qualifying status. It's too late now.

The money is invested and currently you say it is in the managed fund. This will have around 60-70% stockmarket content. There is usually other funds available in addition to this which you can switch to. This can be used to reduce the risk as you get closer to maturity.