Winterthur WP endowment - yet again!

Charlton_King

Hi

Can anyone help? I've been a regular 'lurker' on the financial threads out of general interest but something recently came up which almost answered a question which affects me directly, so I've registered specifically to put this question.

My wife and I took out a Colonial Mutual joint endowment in the early 80s. We have already claimed for misselling against Winterthur who took over CM and have recently received a sum in compensation.

The question now arises as to whether to get out or not.

The product is due to 'mature' in August 2013 and they have given us projections of £20,800, £22,800 and £24,700 based on 3.25%, 5% and 6.75% respectively.

They have also given us a surrender value of £14111, valid for a month.

We are paying in £50/month.

The WP fund is invested percentage-wise:

Equities: 49.4
Comm Property 1.2
Fixed Interest 45.9
Cash 1.5
Others 2.9

The last annual bonus they added was in 2001!

Can anyone suggest our best strategy? I have no idea as to whether they are likely to add a significant terminal bonus. The only other matter I can think may be relevant is that they seem to be treating the former Colonial policies as being different from their own.

EdInvestor

What interest rate are you paying on your mortgage and what is the guaranteed value of the endowment ( sum assured plus declared bonuses) so far?

Charlton_King

After many remortgages, 'further advances' and house moves, our mortgage bears little relationship to the endowment amount originally specified, now being several times greater. We aim to pay off the mortgage eventually through other means. To answer your question, we have just started a three year fixed rate product at 5.25%.

The 'minimum guaranteed benefit', as mentioned in their latest zero-bonus bonus letter is £18,866.

EdInvestor

Charlton_King wrote: »

The product is due to 'mature' in August 2013 and they have given us projections of £20,800, £22,800 and £24,700 based on 3.25%, 5% and 6.75% respectively.


The WP fund is invested percentage-wise:

Equities: 49.4
Comm Property 1.2
Fixed Interest 45.9
Cash 1.5
Others 2.9

The last annual bonus they added was in 2001!

If you surrendered the policy and used it to reduce the mortgage amount @5.25%, also increasing the mortgage payment by the amount of the endowment premium, after 6 years your return would be equivalent to 23,405. To get the same amount from the policy you would need a return of more like 6% because of charges and the cost of life cover.

The problem here is risk IMHO: as they are giving you no more guaranteed bonuses, they are loading all the returns of the policy onto the terminal bonus.The policy may be able to return 6%, but you won't know until the end.Whereas if you surrender and proceed as above you know you will get a 6% equivalent return guaranteed immediately.

As with many endowments these days, the premium you should get for taking a risk on the stockmarket has disappeared.There seems little point in taking a risk when you can get the same return without doing so.

AdesSafe

We were looking to move house but needed a deposit, We had an endowment that was worth around 25k....the finacial advisor suggested we sell it sayijg he could get 15k for it, we were led to believe it was not real money anyway and wouldn't be available for a long time......we agreed to sell it and went through the processs of seling our house and buying another....eventually he came back saying he coulnt get 15 k fior it would we mind 7.5k......as that was all it was worth....again we agreed ( I Know but....).......If I pursue the matter I know there is nothing to stop this guy from simply saying he advised against the sale.....however....If I can show that the Legak & General Policy was worth much more then am I right in thinking I could pursue him for negligence....( especially if it turns out he benefitted from the policy or bought it.....) Am I out of time to pursue this matter.....I think the Policy was worth much more but we had no idea about Financial matters and just trusted everything we were told .....If I can show that the Policy could Easily have been sold for significantly more at that time
would I have a case

Charlton_King

EdInvestor wrote: »

If you surrendered the policy and used it to reduce the mortgage amount @5.25%, also increasing the mortgage payment by the amount of the endowment premium, after 6 years your return would be equivalent to 23,405. To get the same amount from the policy you would need a return of more like 6% because of charges and the cost of life cover.

The problem here is risk IMHO: as they are giving you no more guaranteed bonuses, they are loading all the returns of the policy onto the terminal bonus.The policy may be able to return 6%, but you won't know until the end.Whereas if you surrender and proceed as above you know you will get a 6% equivalent return guaranteed immediately.

As with many endowments these days, the premium you should get for taking a risk on the stockmarket has disappeared.There seems little point in taking a risk when you can get the same return without doing so.

Thanks for your thoughts.

Would there be any chance of getting a better current value for the policy by selling elsewhere rather than surrendering to Winterthur?

If so, any tips?

Charlton_King

Just flagging this one up again in case anyone can advise on my last question!

EdInvestor

Try getting some quotes from

https://www.apmm.org

The TEP traders valuation is a useful check on how much the policy is really worth. If they won't quote at all, you know it's a real dud, so surrender.If they are willing to buy the policy for a lot more than the surrender value, you may want to keep it.

Avoid any trader who offers to find a buyer for your (rather than buy it themselves) even if they offer a lot more.You could wait a long time, indeed forever..