Surrender / Sell Endowment

rs3100

I have a 25 year Low Start Low Cost Homebuyer Policy with AXA Sun Life that was taken out in 1999 to cover a £105,000 interest only mortgage. As I am now in a position to redeem the mortgage I have no further need of the policy.

From what I understand it is a unit linked policy, invested in the AXA Sun Life With Profits Fund.

I have obtained a surrender valuation from the insurer, but would also like to know if anyone can suggest any companies that would quote for trading the policy.

I have tried APMM who I found a recommendation for on here, but they say that they cannot better AXA's offer. From what I have since learned, I assume that is because they don't deal in unit linked policies.

Details of the policy, if it helps:

Date of Policy 5/3/99
Required Maturity Value £105,000
Basic Lifecover Sum Assured £105,000
Current Monthly Contribution £214.58 (fixed until maturity)
Guaranteed Maturity Value £53,333
Projected Maturity Value @ 4% £69,700
@ 8% £121,000
Surrender Value £13390.59

Thanks

dunstonh

Unit linked endowments have a daily value with no future retained value. So there is no reason for anyone to pay any more for your policy. The upside is that unit linked endowments tend to offer greater potential and that is reflected in your 8% projection which shows a 16k surplus.

EdInvestor

rs3100 wrote: »

Guaranteed Maturity Value £53,333
Projected Maturity Value @ 4% £69,700
@ 8% £121,000

If you surrender this policy and invest the money in a savings account @ 5% also paying in the monthly premium to maturity, you should end up with a guaranteed final value of 98,834.

That's almost double the policy guaranteed value.

I'd have thought it unlikely that an AXA unitised With profits policy would achieve an 8% growth rate.Even the best WP funds at the Pru are only targeted to achieve around 6%.

What percentage of the AXA WP fund is invested in equities and property, and what percentage in bonds and cash?

dunstonh

If its the unit linked fund range thats available, then there should be more fund options present than just the unitised WP fund.

rs3100

Thank you both for your replies.

Dunstonh, I suspected there was a restricted market in unit linked policies. Some TEP sites do say that they include unit linked policies with an underlying with profits investment, but when it comes to entering details for a quotation, they then discount them, which is what puzzled me. It looks like I will have to accept AXA's offer, which I am not overly disappointed with. It is a little over 4K less than the premiums paid to date, but then it has provided me with life cover for 8 years and helped me to buy a house worth a lot more than I've paid for it, even taking mortgage interest payments into account.

EdInvestor, thank you for the figures. I had come to the conclusion some time back that the policy was a bit of a dud, which is why I have decided to get rid of it now I no longer need it. I think 8% is a very optimistic projection.

There is a guaranteed bonus rate of 3% per annum attached to the fund, and a regular bonus rate, which for the last few years has been, and is still zero.

AXA seem very coy about the asset allocation of the WP fund. Their annual investment review contains glossy graphs of asset allocations for all of their other funds, but the WP Fund is consistently confined to a couple of pages of plain text at the back of the booklet. It was also closed to new business a few years ago.

I did see a breakdown in a financial newspaper article a while back however, and recall that the allocation of shares was among the lowest in the table, somewhat less than 20%.

I do feel that I am likely to get a better return on my money by investing it elsewhere, on top of which I will have much more flexibility in choosing what do do with it, and when.

dunstonh

EdInvestor, thank you for the figures. I had come to the conclusion some time back that the policy was a bit of a dud, which is why I have decided to get rid of it now I no longer need it. I think 8% is a very optimistic projection.

It may not be a dud. The AXA With Profits fund is not great and 4% would be the fair projection but AXA do have other unit linked funds available which are performing in excess of 8% a year. The policy is one thing, the investment funds are another. Some of AXAs endowments have quite high set up charges (which you have already paid) but have quite low ongoing charges which can make keeping it with the right investment spread a good option. Currently, it is just the fund which is pretty poor quality. Also, being the unitised with profits fund, it is not as weak as the conventional with profits fund.

rs3100

dunstonh wrote: »

If its the unit linked fund range thats available, then there should be more fund options present than just the unitised WP fund.

You typed that whilst I was typing my previous answer, but I'm afraid there aren't.

The Low Cost Homebuyers Plan is tied to the WP Fund in the terms of the contract. There is an option to switch to the Guaranteed WP Fund 10 years before maturity, as long as I agree to pay any additional premium that the company may then require to guarantee the maturity value!

Several other life and pension contracts are tied in to the same fund, with overall annual bonus rates ranging from 1.75% to 4.0%, so I haven't done that badly in comparison.

One of the things I dislike about this form of investment is the lack of transparency, and how different plans can invest in the same fund but declare differing bonus rates is beyond me.

I was financially very naive when I took on my mortgage, but I think I have become a lot more astute since that time, although I am by no means an expert, or I wouldn't be asking these questions

dunstonh

If there are no other options, then it is a fairly weak contract. AXA have bought so many companies over the years and have issued many different versions that you can never assume anything when someone says they have an AXA contract.

One of the things I dislike about this form of investment is the lack of transparency, and how different plans can invest in the same fund but declare differing bonus rates is beyond me.

Its a unitised with profits so each month you are buying units and the declared unit price. Terminal bonuses are much more reactive to when you buy as well. It is the older conventional with profits plans where the lack of transparency is an issue. Unitised with profits plans can actually be quite good and some have been running in double digit returns as they are basically balanced managed funds in investment strategy but with an element of capital guarantee.

However, I wouldnt want to remain in the AXA with profits fund given that is the only choice of investment for you.