Endowment Guarenteed Sum

wonton

Hi experts,

I have an endowment policy which is worth at the moment around £30,000. It’s up in 5 years time and is supposed to pay out £73,800.00 (I’m not using it to pay off the mortgage as I changed to a repayment so years ago). I pay £111.65 a month and that covers life insurance for partner and myself.

The company has written to me stating there will be a shortfall (HA really?). They state that within the terms of the policy if I take their advice they will guarantee the £73800.00 payout if I pay an additional £409.76 for the next 5 years.

So in my simple mind I will have paid £30,000.00 + ((£111.65 +409.76)*60) =£61,284.60

When they pay me £73,800.00 that will be a 20.4% profit (taxfree). or am I missing something?

In this climate that doesn’t seem a bad deal? I can stop and cash it in at any time withoutany penalties as well.

silvercar

So in my simple mind I will have paid £30,000.00 + ((£111.65 +409.76)*60) =£61,284.60

When they pay me £73,800.00 that will be a 20.4% profit (taxfree). or am I missing something?

for a start that payment is in 5 years time, whereas we generally look at interest rates on a year by year.

Secondly you could take the 30k current value, invest it somewhere and save the £111.65 and £409 a month in a savings scheme. Though you should also consider the cost of life assurance for a true comparison.

If you took the 30k now and put it in a fixed rate 5 yr savings bond, you would get say 2.75% gives nearly 34.5k.

Regular savings of 520 (111+409) a month at say 3% (Barclays offer this) would yield 33.6k.



So now you have 68.1k to compare the 73.8k against. I don't know if a bit of research could get you better rates.

TrickyDicky101

Who is the endowment with?

What is the nature of their claimed 'guarantee' should you enter into this arrangement?

The figure they quote for redemption today, does that include an element of terminal bonus?

Annisele

I have seen policies that guarantee they will pay a target amount, *if* the policyholder agrees to meet any increases on premium review dates.

The problem with those policies was that the last review date was (IIRC) a month before the policy matured. So, if you promised to pay a premium of £73,800 just before maturity, they'd promise a payout of £73,800 just afterwards...

In your case, is the company promising that this premium review is the last one? Or is the review annual during the last five policy years?

Roversfan

Why trust them with even more of your money when they didn't do as well as expected to begin with?
Just a thought..

dunstonh

Why trust them with even more of your money when they didn't do as well as expected to begin with?

That is illogical as there is no expectation.

bigadaj

dunstonh wrote: »

That is illogical as there is no expectation.

I'm sure the OP expected the endowment to cover the mortgage when taken out, and the reasoanble risk of this not occurring was not fully explained by the commission fuelled salesperson.

OP to me anniselles comments are most pertinent, endowments are opaque and outdated savings vehicles, this. Might be worth considring if there is a written guarantee that the premiums will be consistent and the payout guaranteed, however I wouldn't hold my breath for this. As others have pointed out there is a higher confidence of achieving a reasonable final sum by using othe savings vehicles.