Endowments - reinvest ortake the money?

muzer

I have four small endowment policies which I took out through work about fifteen years ago. The first of these is due to mature soon and the others mature in 2017,2019 and 2020. They are are forecast to mature (@4%) and pay out roughly £8k, 12k, 16k and 8k. The surrender value if I took it now would total 28k. I have a 65k mortgage with 14 years left to run. I work full time. I have a civil service pension. I am a single parent of two primary school aged children. I'm 41.
Should I allow the policies to run their course or is there any merit at all in taking the money now and looking to pay off a chunk of mortgage or reinvest?
Any advice gladly received.

bigadaj

What's your mortgage rate, and presume you have transferred this into a repayment mortgage?

Probably worth leaving the endowments run their course unless you particulalry need the money.

When receiving the payments it's a choice of paying down debt or investing, dependent on your mortgage rate.

Your pension should be good in public sector, so whilst keeping an emergency cash savings of probably £5-10k is the first thing then investing in shares isas might be a good option.

Nick_C

I don't know whether cashing in early would be sensible or not, but as they mature I would second the suggestion of investing directly in shares. I had a 24 year endowment purely as a savings scheme. While it was useful way of forcing me to save, the overall return was disappointing, around RPI +2%. Endowment fund managers moved money out of equities and into gilts when the markets crashed some years ago, and missed out on the recovery. I prefer to make my own investment decisions these days.

You should obviously make sure you have the means to clear your mortgage when the time comes, assuming it is interest only (will you get a lump sum when you retire?). With mortgage interest rates being as low as they are, I wouldn't pay down a mortgage at the present time. I think you will get a better return by investing.

muzer

Thanks for your replies.
My mortgage is repayment. The endowments were purely (like you say) as a forced savings plan really. My mortgage rate is 1.89 above base tracker.