Keep our endowment going?

estelleB

Hello, looking for any advice out there really on a 'good' endowment problem. We have an endowment linked to our mortgage to pay off approx 40% of it, it has 4 years left to run but has reached its target.

They are offering us 3 options (1) cash in and pay off the chunk of mortgage - we have no penalties for this but are paying a very low interest rate currently
(2) Put the current amount into the deposit fund (low risk but very low growth also), and continue to pay in with future funds staying with the high performing managed fund
(3) Keep all the endowment and future payments in the managed fund - greater chance of good growth, but also more risk

Any opinions? Thanks

holly_hobby

Ok , unit linked low cost endowment, which has hit its target 4 yrs early.

Option 1
Reduce your mge and the resulting payable interest - pretty straight forward

Option 2
No, you can't surrender the policy and keep it going - if you cash the polciy in, thats it the policy (and its benefits) ends.

You could of course en-cash and place the capital into a deposit account, but for this to be worth it the NET (of tax) returns, must exceed the mge payrate, if equal to or less there really is no benefit in not reducing the mge down

Option 3
Yes - you could continue the plan, with premiums continuing to pch units in the managed fund (or whatever fund nominated). Issue is there is no gte the policy will be worth more, or even the same as it is now (even with more units), as its value wholly depends upon the unit price and number of units held in the fund at the time of encashment - of which obviously the price and resulting policy value may/will fluctuate accordingly. And, you've paid and extra 4 yrs of mge interest on the corresponding balance.

Personally, if the policy has already hit its target sum, I wouldbe inclined to happily cash in, reduce the mge and save myself 4 yrs of premiums (which if maintained may not actually result in any higher return) - but that is only my opinion, given that I haven't examined your finances etc.

Never ignore what your Third Eye (aka gut instinct) is telling you ...

Hope this helps

Holly

TrickyDicky101

holly_hobby wrote: »

Personally, if the policy has already hit its target sum, I wouldbe inclined to happily cash in, reduce the mge and save myself 4 yrs of premiums (which if maintained may not actually result in any higher return) - but that is only my opinion, given that I haven't examined your finances etc.

^+1

That's what I would do (but I take a very cautious view of risk).

holly_hobby

TrickyDicky101 wrote: »

^+1

That's what I would do (but I take a very cautious view of risk).

Most peeps do Tricky when it comes to repaying their mge.

Holly x

opinions4u

Me?

I'd grab the money, repay the debt and save the premiums and interest saved in something else with lower charges and better tax efficiency.