Sell or keep Prudential endowments

Factor25

I have the following two policies (originally Scottish Amicable)

Policy start 10/08/1984
Matures 10/08/2009
Monthly prem £30.88
Basic sum assured £8,342
Sum payable on death 21500
Current bonuses £8599 (@ Dec 06)
Surrender value £23008
(incl terminal bonus £7761)
Best trade in offer £23698
Forecasts @ Oct 06
4% = surplus £2600
6% = surplus £4000
8% = surplus £5300

Policy start 01/11/1987
Matures 01/11/2012
Monthly prem £27.87
Basic sum assured £7246
Sum payable on death £21500
Current bonuses £4874 (@ Dec 06)
Surrender value £13612
(incl terminal bonus £4529)
Best trade in offer £14701
Forecasts @ Oct 06
4% = shortfall £4400
6% = shortfall £2500
8% = shortfall £ 300

Mortgage status £61,575 outstanding
£50000 interest only
£11575 repayment
remaining mortgage term 5 yrs 6 months

2yr fixed deal @4.39% ends August of which monthly payments are £405 and we are overpaying by £200 approx monthly.

Was thinking maybe sell the second policy and pay off part of the interest only bit? Other than that i havent a clue, so any ideas will be appreciated.

dunstonh

policy 1 gets LAPR tax relief and is heading for a surplus of around 5k as things stand. This is good example and should be kept.
The second one is not as good but its not far off and current Pru annual and terminal bonus rates are beating the 8% figure so its quite possible to see this one end in surplus as well. Plus with both of these you would qualify for the special bonus when Pru release the orphan assets. That could be the equivalent of the current shortfall at 8%, if not a little more.

EdInvestor

If you sold the first one and used the surrender value to reduce the mortgage @ 4.4% also upping the monthly mortgage payment by the endowment premium, you should end up with the equivalent of 26,608 at maturity.

On the same basis the second one would yield 20,111.

You need to compare these guaranteed amounts with the endowments' projected risk based returns, deducting the cost of life cover if you need to replace it.

dunstonh

Some Pru endowments paid out 14% in bonuses last year (increased terminal and annual).

Factor25

Thank you both for your help. Looks like we will hang on to the first one and decide about the second one in August when our current mortgage deal ends. There was the temptation to sell and reduce the mortgage balance by £38000 and then put the cash saved on mortgage payments into something with no risk attached.

JoeK_3

You are one of the fortunate ones that made the correct choice of insurance companies way back in 1984 and 1987.

Prudential are one of the most asset strong companies in the UK.

JoeK