Cashing in Endowment

julliff

Hello

I have an Endowment with Standard Life (unit linked), and have just had a Red Letter from them. It has been running for 13 years, and quite frankly, I would've been better off putting my noney under my pillow!!

I tried the compensation route, and got nowhere, as the IFA very cleverly sold the business, and appears to be untouchable!

So, I am thinking about cashing the policy in, paying it off the mortgage, and then converting it to a Repayment mortgage (which I can do without penalty, as I have an offset tracker).

Does this seem like a sensible thing to do? And would I have to pay a penalty for cashing in early?

Many thanks

wymondham

seems sensible - we did the same as ours was not very good either!
It's about cutting your losses I suppose - as long as you're sure the policy is a dud then probably a good idea - others will be along shortly no doubt who will offer advice....

EdInvestor

julliff wrote: »

Does this seem like a sensible thing to do?

Yes. An endowment wrapper has no tax relief and most have quite high charges and poor fund selection.So if you wanted to continue taking a risk on the mortgage you've be much better to cash it in and open an ISA with a discount broker and invest the money in some quality funds that might perform.

Alternatively you can get a guaranteed return of whatever you're paying in interest on your mortgage by cashing it in and reducing the loan.

Don't forget to replace the life cover if you need it before cashing in the policy.A unit linked policy won;t have an exit penalty.

It is however a bit surprising that you have only now received a red alert letter: most unit linked policies suffered badly in 2001- 03, but are now recovering along with the stockmarket.

Gorgeous_George

Locking the door after the horse has bolted.

I have a 25 year SL policy that matures in January 2010. AAP offered me 3% more than the SL suirrender value. If it's worth investors buying my policy, I think it's worth keeping. I monitor the SL surrender value each month and it's rising by 0.77% which I calculate will be just under £30K at maturity against a a £31K initial aim.

AAP phoned to ask if I would be selling and I said 'No'. They offered to reassess my policy to see if they could offer more. I await their revised offer.

Maybe you should ask an IFA what to do (the same people who advised you to take the policy in the first place). If they recommend that you cash it in, you should be able to sue them if SL perform well.

If you decide to sall the policy, use the cash to reduce your mortgage. A replacement insurance policy only needs to be the difference between current policy and the cash value of the current policy.



GG

motch

I have a CIS with Profits endowment 25 year team - 9 years paid into it so far, I'm thinking of cashing it in and paying off some debts - but will I have to pay tax on it?? and lose 20% of its value ?

dunstonh

motch wrote: »

I have a CIS with Profits endowment 25 year team - 9 years paid into it so far, I'm thinking of cashing it in and paying off some debts - but will I have to pay tax on it?? and lose 20% of its value ?

If you are a higher rate taxpayer or very close to being one then possibly you will have to pay tax as it hasnt reached a qualifying period yet.

EdInvestor

Gorgeous_George wrote: »

Locking the door after the horse has bolted.

I have a 25 year SL policy that matures in January 2010. AAP offered me 3% more than the SL suirrender value. If it's worth investors buying my policy, I think it's worth keeping.

Hi GG

I guess you missed the OP's point that the policy is unit linked, so can't be sold.

I have a CIS with Profits endowment 25 year team - 9 years paid into it so far, I'm thinking of cashing it in and paying off some debts - but will I have to pay tax on it?? and lose 20% of its value ?

I susggest you ask them what tax would be payable (if any) if you surrendered.One doubts you have made much of a gain over the past 9 years.

dunstonh

I susggest you ask them what tax would be payable (if any) if you surrendered.One doubts you have made much of a gain over the past 9 years.

I dont see them telling you. It requires a calculation which includes knowing a bit about your income. I would expect that to fall under the advice remit which the CIS telephone centre are not allowed to do. They would give you the figures to work out your own chargeable gain but they wouldnt do it for you. To be honest, with CIS bonus rates and the short term, I wouldn't expect a chargeable gain to exist.

pjala

Hang on, to go back to the first question, I was missold an endowment and the orginal company did not exist anymore. Another company took over the business and apparently the responsibility as well.
Got a successful payout.
Now it seems to me that you should also be ok with this.

sheehlb

I have just cut my losses on my endowment as I had mostly repayment but about £35k still covered by endowment. I was looking to be at least £12k short at the end of the term so I cashed in endowment, used the cash to pay off part of my mortgage and converted the remaining amount to repayment too.

I ended up ten pounds a month better off and I am now guaranteed to have paid off the whole amount by end of the mortgage. Mine had been running for 12 or 13 years on a 25 year policy. I would talk to your bank and your endowment company and see what you can find out.

L

motch

sorry to hijack the thread a bit, but just trying to find out if i'd pay any tax on about a £4000 current value endowment ? I only earn about £17K a year, i'd rather invest it in a 6% ISA or pay off debts