Legal & General With Profits Flexible Mortgage Plan

Travis_Bickle1972

.....With Critical Illness Cover and Life Cover.

I wonder if I could humbly ask for a nudge in the right direction from the forum experts.

I started this policy in 1998 as the vehicle to pay off the mortgage on my first home. Since lurking here for years, I have been heavily overpaying and the outstanding balance is now only £30K, having concentrated on overpaying a more expensive repayment mortgage first. I plan to have this loan paid off in the next 3-5 years.:T

I realise I may have taken my eye off the ball regarding the endowment!

The original target was £48,500. It matures in 2023. The last advice from L&G was that the shortfall could be £12,300(Jan 2011).

Projected final amount:
£30,100 @ 4% growth (the most likely I'm sure)
£36,200 @ 6%
£43,600 @ 8%

Payments are £73.72 a month.
33.25% of the premiums were invested for 24 months
97.85% onwards
Commission was £784.60 and £1.90 from month 25.
The plan charge is £2 a month.

As this is now going to be a savings plan to (hopefully) extend our house. I want to ensure I'm not throwing good money after bad.

According to the original projections from the IFA I understand the bulk of the 'profit' is made over the last 5 years.

However, I have read other threads and I am still a little unsure I understand the current situation correctly.

I currently hold £12381.75 units @100p = £12381.75!:huh:

I picked a low/medium risk managed fund, which is invested in the general spread, bonds, shares etc. The life critical illness cover is of worth to me. I believe it would be more expensive if I sourced it independently.

I just like to know whether it is worth continuing to pay into this plan? What options would be available to me if it isn't?

Should I consult an IFA? Any general advice would be very gratefully received.

Travis_Bickle1972

Bump, can anyone offer any suggestions please?

onlyroz

I would also be interested in any opinions on this. We have a similar plan which was meant to return £45308 in 2020. The monthly payments are £68.74 and the current value is £16203.90.

The policy is described as both "unit linked" and "with profits" and so I'm not sure if a terminal bonus will be paid, and how on earth £16k can turn into anything approaching £45k in the next seven years. I think the last projection we got estimated a £15k shortfall, but I can't see how the policy can even get near that unless the terminal bonus is huge.

Any thoughts?

Thrugelmir

That's why you received a warning letter stating a projection of £30k.
As there's little likelihood of achieving the target figure.

onlyroz

Thrugelmir wrote: »

That's why you received a warning letter stating a projection of £30k.
As there's little likelihood of achieving the target figure.

I know it'll never reach £45k, but I'm curious as to how it's meant to reach £30k in the next 7 years considering it's now worth £16k.

bigadaj

onlyroz wrote: »

I know it'll never reach £45k, but I'm curious as to how it's meant to reach £30k in the next 7 years considering it's now worth £16k.

Short answer is it probably won't, but endowments are opaque and therefore poor investments. However you value the other benefits so it may well be worth continuing to pay in.

Yo can see what they are currently paying out from published payments, but that is no guarantee what it will ultimately generate. You are paying in a little less than a grand a year, so added to the current value and assuming some growth, though given your preference this will be low, then you are looking at low to mid twenty thousands, would be my guess.

Travis_Bickle1972

Hello

I'm now seriously considering cashing in. I've done as much 'research' as I can on the internet. L&G seem to be one of the 'better performers' and I understand a lot of the value will come in the last few bonus years. However, thankfully we are now mortgage free and I'm sure I could pick up life cover cheaper elsewhere.

I don't want to be throwing good money after bad as my earnings have been reduced by half after redundancy. Would my only option for advice be a financial advisor and what would I be likely to pay?

Many thanks.

dunstonh

Would my only option for advice be a financial advisor and what would I be likely to pay?

Yes. Advice is regulated and only financial advisers hold the authorisations to give regulated advice.

It is hard to say what you would pay as there are around 20,000 advisers out there. All with different business models, target clients, overheads etc. However, i would not be surprised to see a figure of around £500.

Travis_Bickle1972

Thank you. That would be a sizeable sum in comparison to what i could expect the fund to achieve.

dunstonh

Travis_Bickle1972 wrote: »

Thank you. That would be a sizeable sum in comparison to what i could expect the fund to achieve.

I expected that would be the case. In these days of explicit charging and no commission and audit trails miles long and everyone covering their backsides, it couldnt be done cost effectively.