Standard Life - How much will my policy be worth tomorrow?

EdInvestor

It's a question of risk and reward: on something as important as your home, you want a suitable reward for taking a risk that you won't be able to pay off the loan by using the endowment.

Was passion8's reward adequate to compensate him for the real worry that he experienced of a shortfall?

Looking back, would he have preferred to pay a bit more for the security of a repayment mortgage?

Only he can say.

passion8

EdInvestor wrote: »

It's a question of risk and reward: on something as important as your home, you want a suitable reward for taking a risk that you won't be able to pay off the loan by using the endowment.

Was passion8's reward adequate to compensate him for the real worry that he experienced of a shortfall?

Looking back, would he have preferred to pay a bit more for the security of a repayment mortgage?

Only he can say.

I'm more worried about my apparent gender change EdInvestor

Seriously, and this is advice to anyone reading - read the small print! Or get advice.

We (husband and myself) are notorious for being lax with money-related things, and not doing what I suggested above ...and that's asking for advice, free or otherwise. (We're just trying to work out our mortage, and I wouldn't even know where to start with asking advice regarding that one )

We're not doing cartwheels about the forecast, but we are happy that it's reached its target and paid a little extra - it could have been much worse imo.

Thanks for the post !!!!!! there

Gorgeous_George

Hi again

As it is a new month tomorrow, I thought I'd dig out this thread in readiness for my monthly update. Great to see another SL policy returning a surplus

Don't forget the free shares passion8 :beer:

My endowment was sold to me when inflation was somewhat higher than in recent years. If it had continued at the higher levels, I guess that a £30K surplus would be 'worth' closer to the actual surplus that passion8 is expecting.

Ok, it is not great but it could have been so much worse.

GG

Gorgeous_George

1st April's figures (last month in brackets):

Basic value.........£21,375.72...(£21,292.14)
Final Bonus...........£4,435.47....(£4,322.31)
Total plan value...£25,811.19...(£25,614.45)

GG

Dick_here

So in less than a year - going back to your OP George - your policy has gone up by £3k for an outlay of £500, roughly. What does Ed make of that, I wonder ?

EdInvestor

See post no 20 and following for my views on GG's policy.

Dick_here

EdInvestor wrote: »

If you took the surrender value and used the money to reduce the loan @6.49% and increased the mortgage payment by the endowment premium to maturity, your total return would be 31,775, higher than the target i believe?

Doing the same with the BTL mortgage would result in a return of 31,906.

Obviously these are guaranteed returns, no risk involved.

But you are assuming Ed that the target on GG's policy is the maximum that it could pay out. In reality, it could pay out more or less. That is the risk, I agree, but you present it as taking a risk with no chance of winning.

Gorgeous_George

!!!!!!_here wrote: »

So in less than a year - going back to your OP George - your policy has gone up by £3k for an outlay of £500, roughly. What does Ed make of that, I wonder ?

Not quite right but, excluding the premiums, I make it an annual return of 10.79% - tax free! That's equivalent to 17.6% for a higher rate tax payer. That return came with some risk and it could have gone down. With under two years to maturity, now might be a good time to bail out.

GG

EdInvestor

!!!!!!_here wrote: »

But you are assuming Ed that the target on GG's policy is the maximum that it could pay out.

Not at all. I am making a judgement about what the SL with profits fund is likely to pay out, given its investment mix, the 20% tax levied on the returns and the deduction for life cover. In GG's case there may be some LAPR tax relief, which would mean his performance would be better than this.

A key factor with SL endowments though is the loss of the free assets, which has devastated terminal bonuses over the past 4 years, meaning that very few policies will reach their target.

In reality, it could pay out more or less. That is the risk, I agree.

Yes, and you want an extra reward for taking a risk, that's a basic principle of investment. If the risk free return (the mortgage interest rate) is the same as or higher than the likely return of the WP fund, then there is no risk premium at all and it's not worth keeping the policy.

That is sadly the case with many endowments these days.

passion8

Gorgeous_George wrote: »

[snipped]
Don't forget the free shares passion8 :beer:

I'd clean forgotten about those! but thanks for the reminder.:beer:

And good luck and best wishes with whatever you decide to do with your endowment