Should I keep my endowment or sell it?

jamesd

EdInvestor wrote: »

But the question for a person with a policy coming up to maturity is: has this process finished?Or will the payout keep declining for a few more years yet?

It'll probably be continuing because there are still higher growth years 25 years ago in the system that haven't dropped off yet.

EdInvestor wrote: »

In which case, he would be better to cash in now and not waste the rest of his premiums so as to get a smaller payout at maturity than if he surrendered today.

This does not change the future payout for any current plan! He has already suffered the decline. It's done and over with for anyone with a plan in place. All the numbers are doing is reporting the effect of the past on the final results of policies that have now ended.

They are not a measure of future growth for money in the plan today or being put in it tomorrow. Use them for that and you're badly misrepresenting the facts.

These are not current prices of shares. They are more like the total of the prices at the start of the year for the last 25 years. As a year with a high price leaves the 25 years the total falls but that doesn't change the value of the share today or in the future.

You might try extending my example for year 6 assuming the same bonus rates as in year five. The total payout rises to 325 as the year of lower returns is eliminated from the time series. But it'll be a long time before the market drop starting a few years ago has worked out of the system and the high returns of 25+ years ago might not return at all.

You're perfectly right when you look at the current investments and see a high proportion of bonds and say that growth will be lower in the future. That is a guide to future performance. But these numbers are largely not showing that - they are showing the decreasing equity returns over the last 25 years and those are already part of the current values of policies people are holding today. Some of it - the most recent years - will be the switch to bonds, but there's the longer term decline in equities that's still the bigger factor. That'll probably be so until around 2015, looking back at equity returns from the early 1990s.

EdInvestor

This does not change the future payout for any current plan! He has already suffered the decline. It's done and over with for anyone with a plan in place.

I think you may be confused about how With profits policies work, james.

jamesd

How do you propose to change the past performance by selling today? That's what you're suggesting when you're using those final payout figures.