Should I sell the endowment??

mtbrider1970

Hi,
Only posted once before many years ago and just wanted some advice.
I have a Scot Am(PRU) Home Start endowment with profits plan that is due to mature in Feb 2018. I pay £69 a month and it was expected to return £50,000. I understand this has been under-performing and PRU's projection is for 6% growth, paying out £36,200.
Today I called for a surrender valuation which was £24056.85 and currently 0% MVR(I believe this is good???). I have not yet received this years bonus statement from PRU, apparently it is due this week.
I have a Nationwide repayment mortgage on the SVR rate 2.5% which I overpay £600 every month and never really expected to use the endowment policy to pay off my mortgage just really as a bit of savings vehicle.

We would like to update/extend the kitchen this year, our current savings could cover this cost if done at the end of the year or we could use some of the endowment money and do it now.

I Just wondered what people thought about surrendering this policy now.

Is it worth it? I don't miss the £69 per month. I have added up all the money I have paid in over 20 year = £15364.80 and I have to admit the £24056.85 surrender value was a surprise, I thought it would be less.
Would the surrendered money be liable for tax? If so how does that get paid?
Is it worth trying to sell it to someone like APMM?
Is there a better way to use this money now? Not to complicated though.
Should I just pay off more of the mortgage with the money?

My wife and I are both 42 in relatively secure jobs with a good incomes and pensions, however if we could do something better with this money now that would be nice.
Many thanks in advance for any advice.
Regards,
Kev

mtbrider1970

Some forum,
One week later, not one response, no one bothered to post their experiences, pass on their knowledge or offer any advice.
many thanks,
won't bother again.

Barbeduk

Blimey! Only posting now as hadn't read earlier post.

I'd personally see what you can get for it if you sell it on. We sold all of ours 6 years ago and got more than the SV.

Am out of the loop now on endowments but doubt you'd get much of a terminal bonus, if any, on maturity as they've been under performing for so long.

Low cost endowments, in my opinion, are one of the biggest cons the insurance industry ever pulled.

mtbrider1970

Hi Barbeduk,
Thank you for sharing your experience. I think I had already made up my mind to sell or surrender. Other people today have started posts on surrendering endowments which also indicate this maybe the best thing to do, I am sure I could put the money to better use elsewhere.
Regards,
Kev

bigadaj

There isn't really a market in traded endowments anymore so it's either continue or surrender.

The endowment will also have life cover as well, which could be relatively cheap if you've had it fro some years, so this in itself could of value given the premiums you pay.

MikeAppleton

Yea there used to be companies buying endowments because although they didn't perform as marketed, they were still a good guaranteed investment. Surrendalink were the big ones I can think of, looking at their website it looks like they are still trading.

The problem with endowments is that the more people that pull out and surrender, the lower trading power the policy has so it's value reduces.

The reason people might have been wary about giving you advice is that one would need to be registered with the FSA to give you advice. Facts you can have freely, but advice as to whether or not you should surrender can only be given by a qualified and regulated person.

Annisele

If a post drops off the first couple of pages, people tend to miss it. If you bump it (post again to the same thread) it's more likely people will see it. And as MikeAppleton says, we're not allowed to give advice on this site. Information, comments, all well - advice is a no no.

From a tax perspective, your endowment almost certainly started out as "qualifying" for tax purposes. Assuming you haven't made any changes to it, it'll still be qualifying and you won't have to pay any tax on surrender.

No MVR means no market value reduction. Sometimes a firm will say your policy is "worth" £1k, but it'll only pay you £900 - except on MVR free days (often 10th anniversary of the policy).

What's the interest rate on your mortgage compared to the post-tax return you get on your savings? That'll have an impact on whether you decide to use money to pay off your mortgage.