15 yr savings plan to pay into mortgage 110K

sistersis

I have 2 x 15 yr savings plans with AXA those carole smile ones she advertised.
We currently pay £80 and £90 a mointh into them.
I really want to reduce/pay off my mortgage and was wondering whether it would make sense to cash them in and pay the lump sum off of my mortgage and then put the £170.00 in a savings plan as our mortage is currently fixed at 5.5% unitl sept 2009. We have 11.4 years left on it.
By paying a lump sum what interest would I save on my mortgage!!
Our mortgage lets you pay 10% off a year too.

First policy - Matures 11th March 2018
Amount paid in = £5.520
Surrender value = £4831.18
Guaranteed lump sum when matured £11,070
Projected values after 15 yrs Assuming rates of growth
4% £12,151 - 6% £19,900

Second Policy - Matures 31st Jan 2015
Amount paid in £3.300
Surrender Value = £1753.12
Guaranteed lump sum when matured £8,856
Projected values after 15 yrs Assuming rates of growth
4% £13,900 - 6% £15,600

The policy does not allow me to sell them on.

What I was thinking is that I could put £6,584.30 into my mortage and then pay the £170.00 a month into a savings account that pays 7% or more and then transfer this over to my mortage say once a year.

Any help would be greatly received
Thanks

Lotta_Littlies

I don't think plans like this are advised any more, if they ever were in the first place. To begin with the figures you have been given are just projected figures which aren't at all guaranteed. You could as easily get back little more than you have paid in, and sometimes not even that. I think these policies have generally performed poorly IIRC and you'd be wiser to cancel and invest your money into a cash ISA each year, or if you already use your ISA allowance into a regular savers account.

There are plenty of ISA's at around the 6% mark with the Barclays Tax Beater for example at 6.5%AER. By putting your monthly payments into this you are guaranteed a return of 6.5%AER, plus interest which you can pay off as a lump sum when your mortgage rate expires in 2009 so you will know that not only is your money safe and you aren't going to lose a penny on it, but you'll also gain a guaranteed (not estimated) rate of interest on it.

Lotta

Dithering_Dad

I'd ask this question on the investments boards. A lot of Financial Advisers hang out there and will probably know more about your specific product. From the looks of it though, if you cash in now you'll lose all of your money, so you might as well carry on until the cash in value is at least what you've invested.

Lotta_Littlies

I agree, though I had one of these plans and cashed it in a couple of years ago after paying into it for eleven years. Still got a couple of hundred less than I'd put in but think of all that lost guaranteed interest I'd have had if I'd simply used tax free savings accounts or reg savers :rolleyes:

Lotta

sistersis

HI Thanks for the info I will move this post to the investments boards.

Lotta_Littlies

Sorry, just noticed the figures here and that you aren't even guaranteed to get back what you've paid in from the start.

Assuming your first policy is the one you are paying £80 a month into over fifteen years you would have paid in £14,400 at the end of the 15 years but you're only guaranteed to £11,070 back. I think my aim would be to get the surrender value up so that you break even and cash in the policy. It really doesn't seem worth it and I'm interested to see what the savings board say on the topic.

Good luck with whatever you decide to do anyway, perhaps try to overpay the mortgage directly by getting a mortgage pig - after all, every little helps

Lotta