Thats me stuffed

kent_money_saver

Ive just got a final value on my endowment, taken out in 1991, so apparently its out of the jurisdiction of the finanancial onbuds.I tried for compensation.
It should have made 51k,surrender value today £33,543, matures in june .Well thats a 17 grand kick in the teeth, thanks L and G.:eek:
Four payments to go £111,feb,mar,apr,may.NO terminal bonus as of todays forecast.hmm.
question ?
Do i surrender it today, not make the payments and chuck it straight in the mortgage or let it mature?on the hope there may be a terminal bonus?
The only bonus i can think of is ,is that there is still life insurance attached.

squeeks

Not really stuffed. Yes it under performed and you appear to have lost out due to inflation. But I wouldn't say it was a totally unmitigated disaster.

Personally if I had stuck it out for 22 years, and I only had 4 months to run, I would just let it finish. I can't see it loosing much more value in the remaining time compared to other investments at the moment and where else would you put the money if it wasn't in the endowment?

I'd be very surprised (and interested!) if there was an investment vehicle you could find to turn 33k in to 51k over the next few 4 months.

kingstreet

Did you receive warning letters in the last ten years, or more?

Did you move part of the mortgage onto repayment to mitigate the suggested shortfall, or run a separate savings account alongside the endowment to make up the possible shortfall?

It's probable that had you got the return you needed on the endowment, interest rates over the last ten years would have been a lot higher, so you'd have won on the swings and lost on the roundabouts.

No terminal bonus? Why? L&G not paying any for your policy term, or is it unit-linked?

onlyroz

Weren't you given warnings over the years about the underperformance? We've got an L&G endowment due to mature in 2020. It was originally intended to produce £45k but we reckon it might achieve £30-35k and so we're setting aside extra money each month to cover the shortfall.

holly_hobby

No, its not out of FOS juristiction - as it was sold post April 1988, so was a regulated sale.

What I think you mean is that you are time barred, becuase you recd your first red EMV warning letter over 3 yrs ago (most likely you actually recd this in excess of 10 yrs ago).

The revised EMV, which was an industry wide exercise due to low interest rates (meaning that the cost of borrowing had reduced and was relatively low compared to previous yrs), influencing poor invetment returns & some makets collapses, and gave clear direction on what the Red/Amber letter and resulting estimated shortfall meant to you and your mortgage, gave advice on how to address the issue (change all or partly to repayment), and also how to proceed if you felt the risks were not explained to you at point of sale (ie policy wasn't suitable).

From what I can see, you maintained the policy post this advice, and also indicate that you are unhappy with the policy's poor performance not suitability, which is loss of expectation and could not be compensated for, even if you had complained within the first 3 yrs following notification of the potential sfall to target.

Putting that to one side, given the duration you have maintained the policy (despite knownig the potential risks), I would continue for the remaining few mths to maturity (unless of course its causing financial hardship). If this is a WP policy (the quoted SV won't reduce if you leave it to continue, but you may gain a TB). If its a Unit Linked contact, there is no TB, and the SV may change in respect of any movement to the value of the underlying units - so you may want to think a bit more re maintaining till maturity.

Aside from this, and if the policy is still being used as a mortgage repayment vehicle, what arrangements have you put in place to meet the sfall to target ?

Have you advised your lender of the situation, and discussed how any mge shortfall resulting from the endowment maturity/SV will be addressed ?

If you haven't had a chat with them yet, may be time to make a call just to put them inthe picture and give time to negotiate a forward action plan. Which may involve switching any shortfall to capital and interest and extenting the term by a further 5 yrs (subject to status).

Hope this helps

Holly x

kent_money_saver

Thanks guys, yes i knew it was underperforming, and i had switched to part and part as they say after a house move around 9 years ago.
I have been overpaying the interest for years in a vain attempt to nuke the shortfall.
And yes the bonus is, that the interest rates have been low for so long now, it has really helped to reduce the balance and lower the effect of the poor performance.Thanks Mr George!!
There are no other vehicles left now, when the cheque arrives in june, i'll have around 40k to find on an interest only basis.
I have spoken to first direct and they can see the large overpayments going in and they are more than cool about it.
The positive side is that i wont be paying the endowment so there will be an additional £110 going in the pot.
I accepted that the investments werent doing very well, but it dawned on me looking at the paperwork, that i doesnt say anywhere on the original sale paperwork, that this policy may well go up and down, there is no mention of it.
And being quite nieve at 21 when i bought my first house,i didnt see that one coming.
The only thing i thought was that cashing it in early would see 33.5k paid into the mortgage and thus reducing the capital interest by four months worth,and an additional four months of premiums going in the pot early, the down side is that i would lose 4 months of life cover and there may, and i say may, be a terminal bonus at the end,at this moment in time L and G's view is that will be zero, but that may go down as well as up.sic.
Thanks again.Kent

kent_money_saver

onlyroz wrote: »

Weren't you given warnings over the years about the underperformance? We've got an L&G endowment due to mature in 2020. It was originally intended to produce £45k but we reckon it might achieve £30-35k and so we're setting aside extra money each month to cover the shortfall.

Mine was a regular joint policy endowment by L and G due to make 51k,its just gonna scrape thru at 34k thats about a 33% shortfall.
Good luck my friend, i wish you well.

Thrugelmir

kent_money_saver wrote: »

It should have made 51k,surrender value today £33,543, matures in june .Well thats a 17 grand kick in the teeth, thanks L and G.:eek:

Maturity value may well be higher.

Terminating early will incur a penalty.

holly_hobby

If a Low Cost Endowment - WP policy, whilst the estimated % representing the TB may change right up to maturity, the current quoted SV of the policy won't reduce any further.

If its a Unit Linked contract - then yes the SV of the policy may change on a daily basis, the volatility of movement largely depending upon the investment fund(s) and underlying value of units. Again, to confirm a UL policy does not attract or qualify for any TB.

Of course cancellation of a qualifying policy (which provides tax free payment on maturity), before 10 yrs prems are paid (along with other criteria), would also attract taxation to the gain (as it becomes non-qualifying) - which could be classed a backhanded of penalty I guess.

AFAIR the application of an MVA/MVR adjustment on early surrender, only relates to traditional WP fund - full endowments and investment vehicles such as bonds, etc, (and I'm almost certain) does not relate to early encashment of a low cost (aka mortgage) endowment. As you hold a LCE WP policy (which has also met qualifying regs), I wouldn't expect to see the application of either an MVA/MVR adjusment (or tax liability) on the SV.

To which the WP SV value that you have been quoted (which is based on %BSA and current attaching reversionary bonuses), will not reduce any further and should be applicable until next prem collection (following which a new SV calc will be reqd for an accurate pre surrender fig), and will in any event be quoted net of any applicable adjustments.

As I say, if a WP plan, and given the situ, on going death benefit of the target sum, and if affordable, I really would consider continuing to service until maturity - with fingers, eyes and toes crossed for a little something extra when the time comes. Of course any decision must be balanced against the fact that there may be no TB payable at all - and settle with yourself that should this occur having maintained to maurity, you won't take the news so badly that you'll throw yourself off the wardrobe !

Hope this helps a little ...

Holly x

kent_money_saver

Holly thats very good of you explaining TVM.
I guess i'll take a punt and hang on the four months and see if lady luck is on my side.
AFAICR there was a 25% TB last year on L and G endowments, but its just my luck its all gone pete tong for me.
Thats life.

holly_hobby

Come back and let us know how it went ..... fingers crossed for you !

Holly x