Ditch your endowment policy - is this the general opinion?

RainbowsInTheSpray

I've received dunstonh's opinion that I should consider surrendering my endowment policy with Winterthur which has five years to run.

They have added no bonuses to it for the last few years.

I had thought that the usual advice given was to hang on if you were approaching the end of the policy.

Any other thoughts out there on this?

dunstonh

I've received dunstonh's opinion that I should consider surrendering my endowment policy with Winterthur which has five years to run.

Not quite said that. I said you should review it and see if you should keep/sell/surrender. Without reviewing it, it isn't possible to tell one way or the other.

I had thought that the usual advice given was to hang on if you were approaching the end of the policy.

Any other thoughts out there on this?

For the benefit of those that have not read the other thread, I pointed out that there is no such rule or advice to hold a policy until maturity. If the plan is no longer fit for purpose and better alternative options exist, then you go with the best option.

The "keep it going" viewpoint is an old wives tale which has come about due to tied agents, who are not authorised to recommend cancellation of plans, telling people to keep them going. If you ask a tied agent if you should cancel one of their plans you will be told no in the vast majority of cases. Not because that is the right decision but because the tied agent isn't allowed to say it (unless it is due to no longer being eligible).

IFAs are free to tell people to stop/sell/surrender on any plan they hold. However, as historically most people see tied agents, the incorrect viewpoint has become a bit of an old wives tale which has no truth.

The FSA itself has issued a number of papers over the years as guidance to advisers on when and when not to surrender/switch/transfer etc.

defender_of_the_weak

Just to clarify the old wives tale as dunston describes it.

Following the introduction of low cost endowments (the commonest type used for mortgage repayment), they were structured that a significant amount of the value would only be paid on death or maturity. In some cases this terminal bonus amounted to 50% plus of the final value. So for older policies that have not restructured the terminal bonus (if any) is quite important. During the 90's providers changed structures to allow partial terminal bonuses to be added to early surrender

Bottom line, get a proper review of your individual plan

JoeK_3

This thread is typical of the dangers of either reading into the written word or not reading things at all.

As an Independent Financial Adviser, I am extremely carefull of giving any specific advice at all and when this happens, we get accused regularly of being "sat on the wall," by Edinvestor.

It sounds like the OP is now questioning the written word that was not stated at all and asking unqualified people to give them advice and opinions.

Take care fellow professionals on what you write and how you phrase it,

JoeK

RainbowsInTheSpray

JoeK wrote: »

This thread is typical of the dangers of either reading into the written word or not reading things at all.

As an Independent Financial Adviser, I am extremely carefull of giving any specific advice at all and when this happens, we get accused regularly of being "sat on the wall," by Edinvestor.

It sounds like the OP is now questioning the written word that was not stated at all and asking unqualified people to give them advice and opinions.

Take care fellow professionals on what you write and how you phrase it,

JoeK

Well, JoeK, let me reassure you that I was merely seeking further 'professional' reassurance on the matter. I had no issues with Dunstonh's comments other than a need to seek confirmation.

It may come as some surprise to you but it has genuinely appeared to me as a 'non-professional' over the last few years that the advice was still to hold on to endowment policies if they were in the final stages. I am sure that I have noticed pundits on e.g. BBC's 'Working Lunch', radio discussion programmes and elsewhere stating precisely this. It would intrigue me if it turned out that I were the only benighted person to be under this impression.

It may also come as a surprise to you that the standard of written English, in the case of certain IFAs on here, leaves so much to be desired that I feel myself obliged, with a degree of irony, to echo your warning to your 'fellow professionals'...

gentiandaisy

RainbowsInTheSpray wrote: »

I've received dunstonh's opinion that I should consider surrendering my endowment policy with Winterthur which has five years to run.

They have added no bonuses to it for the last few years.

I had thought that the usual advice given was to hang on if you were approaching the end of the policy.

Any other thoughts out there on this?

While you may not be receiving Bonus's at the moment I think that the final Bonus which would take into account the whole term of the Policy. In the past the Final Bonus was always quite a substantial amount.
You should request a forcasted Final payout and weigh this againt what you would receive if you surrended the policy now together with premiums you would save.

pjala

defender_of_the_weak wrote: »

Just to clarify the old wives tale as dunston describes it.

Following the introduction of low cost endowments (the commonest type used for mortgage repayment), they were structured that a significant amount of the value would only be paid on death or maturity. In some cases this terminal bonus amounted to 50% plus of the final value. So for older policies that have not restructured the terminal bonus (if any) is quite important. During the 90's providers changed structures to allow partial terminal bonuses to be added to early surrender

Bottom line, get a proper review of your individual plan

I was told on mine that the terminal bonus was a percentage of the added bonus, not the total figure. The added bonus' are the things that are disappearing on the worst policies over the last few years. My Friends Prov policy had bonus of .25 .5 etc. over the last few years.
As always you MUST check out all the facts and figures, if you do your homework dunstonh and edinvestor both have opinions on this - but it comes down to you working out the figures yourself.

If you can't work out a reasonable figure for what you think you might get, then stay with it till you can. The big problem for me with endowments (what a stupid idea it was to buy one in the first place) is that it's a big mystery what the final figure is until you get it!

Shambler

My personal situation,

Endowment has been running for 17 years out of 25.

Current surrender value £16,000

In 7 years time the estimated maturity at 6% growth is £31,000.

To me that means keep hold of it.

EdInvestor

Shambler wrote: »

Endowment has been running for 17 years out of 25.Current surrender value £16,000.In 7 years time the estimated maturity at 6% growth is £31,000.

To me that means keep hold of it.

Which company is the provider, what is your monthly premium and the interest rate on your mortgage?

Those forecasts are done according to a set formula dictated by the regulator. They do not necessarily bear any resemblance to the likely performance of your policy.

Only a very few companies will achieve 6% growth in their WP fund, most will fall well short of that.

JoeK_3

RainbowsInTheSpray wrote: »

Well, JoeK, let me reassure you that I was merely seeking further 'professional' reassurance on the matter. I had no issues with Dunstonh's comments other than a need to seek confirmation.

And to date you have had only two professional people that are qualified and willing to comment.

RainbowsInTheSpray wrote: »

It may come as some surprise to you but it has genuinely appeared to me as a 'non-professional' over the last few years that the advice was still to hold on to endowment policies if they were in the final stages. I am sure that I have noticed pundits on e.g. BBC's 'Working Lunch', radio discussion programmes and elsewhere stating precisely this. It would intrigue me if it turned out that I were the only benighted person to be under this impression.

This is not the place to receive advice on an endowment policy (unless you just want to be told to cash them in by certain individuals) and neither can that advice be the same to all individuals.

You should consult an Independent Financial Adviser and not try to imply or accuse one on a publlic forum that he has suggested that you surrender yours.

RainbowsInTheSpray wrote: »

It may also come as a surprise to you that the standard of written English, in the case of certain IFAs on here, leaves so much to be desired that I feel myself obliged, with a degree of irony, to echo your warning to your 'fellow professionals'...

Thank you for the Engish lesson.

JoeK

EdInvestor

JoeK wrote: »

You should consult an Independent Financial Adviser and not try to imply or accuse one on a publlic forum that he has suggested that you surrender yours.

Anybody would think it was a heinous crime for an advisor to suggest that someone should surrender an endowment. Is it really a shocking thing to do to "accuse" an advisor of suggesting someone do this?

If so,why?

The main thing stopping advisors from telling the whole world to surrender their endowments is personal back protection.None of them knows enough about the various With profits funds or how insurers run them, to be absolutely sure the advice will turn out correct - and of course where applicable, they don't have a crystal ball on how the stockmarket will perform either.

So what if they advise surrender, and then later the regulator changes the solvency rules, the company reorganises the WP fund, the stockmarket rockets and the policy ends up producing a massive terminal bonus like in the old days?

Ten years later, having surrendered and missed out on this boom, the punter could easily turn round and file a complaint against the advisor who suggested he sell, demanding compensation for his loss ( or rather his failure to profit).

So, to avoid future complaints, it's much easier for the advisor to suggest you do nothing, especially as he is no longer selling With profit products like endowments and thus has no incentive to be well informed about the companies that offer them.

In addition, since best advice will often be to to use any surrender proceeds to pay off the mortgage loan - which will generate no commission for the advisor - there is even less incentive to bother with this kind of client, who is unlikely to want to pay a fee.