Ditch your endowment policy - is this the general opinion?

Crazy_Saver

EdInvestor wrote: »

Unless you already have a WP bond that you are trying to get out of, suggest you bin this particular guide to what is now an obsolete product (rather like an endowment mortgage...) .

HI Ed.

Mine is a WP endowment which is the reason that I am trying to brush up on the facts.

Cheers..............Crazy Saver

Crazy_Saver

Just checked the publication date on the Isa guide - Feb 2007. Hopefully this might bear a bit more relevance to today's market!

Crazy saver

Crazy_Saver

Hi Ed.

My Endowment is split -

71% Fixed interest
21% UK Equities
4% Properties
4% Cash

Going by what you have said and also after doing some reading, am I right in thinking it could be a Zombie?

Regards

Crazy Saver

EdInvestor

Crazy_Saver wrote: »

Hi Ed.

My Endowment is split -

71% Fixed interest
21% UK Equities
4% Properties
4% Cash

Going by what you have said and also after doing some reading, am I right in thinking it could be a Zombie?

Yup, I'd say 75% safe versus 25% risk assets is definitely in zombie territory.

This is a good example of why many endowments are no longer fit for their original purpose. When you took this one out, its asset mix was probably something near the opposite of what it is now - 75% in growth assets and 25% in "safe" stuff.

The switch (caused by new regulatory rules) means that the endowment now has no chance of growing enough to pay off the mortgage, especially as it will have lost much of the profit it earned earlier before the market fall.If it was still invested 75% in equities and property, it would have a chance of getting that back as markets recovered, but the new asset mix means that can't happen.

Almost certainly you will do better to bin this one, but post the usual info if you want a check.

jamesd

It's not as bad as some but that's not very impressive. You might get 7-8% return.

Crazy_Saver

jamesd wrote: »

It's not as bad as some but that's not very impressive. You might get 7-8% return.

Hi jamesd.

I am only a novice but I'm learning fast.

When you say 7-8%, is that instead of the usual 3, 3.75 & 5% figures quoted on my statements?

I ask this because when I spoke to Zurich this morning the telephonist said that as most of my money is in fixed interest, it means it's regarded as "safe" and would therefore have a return of 3.75%. At least she was honest and agreed with me that the future doesn't look good for my endowment return:cool:

Thanks for your help

jamesd

3.75% is even more unimpressive for fixed interest combined with equities. Ignoring insurance it's hard to see how you could fail to do better than that.

EdInvestor

Jamesd is ignoring the high (and opaque) charges on old WP products plus the taxes on any gains payable inside the endowment wrapper. In addition to that, many of these companies have issued expensive guarantees to other (pension) investors in the fund, and are having to drain profits from endowment investors' policies to pay for them.

Don't expect more than 3.75%, these funds are not known as zombies for no reason.

petermb_2

If i give you an example about surrendering you can all form your own opinions.

A client of mine from years ago had a pru endowment over 10 years. He had paid the thing on time every month and had one year to go.

He requested a surrender figure.

He was advised that if he cashed it in year nine he would receive around £1000 but if he carried on for the reamining year he could expect £9000.

It appears that most of the bonuses are on termination(maturity).

I will leave you to make up your own minds as I am sure they all work the same, more or less.

EdInvestor

It's many years since that was the case: surrenders always now include the final bonus earned so far.

I mean advisors wouldn't be able to do any churning otherwise, would they?