Keep Standard Life endowment or dump?

silvercar

I would be grateful for any opinions.

I have a SL endowment that is due to mature January 2018.

Plan value now is (only) £20,900, comprising £15,400 fund value and £5,500 final bonus (value if we had cashed policy in last month). Mid rate estimate is that the plan would be worth £27,600 at maturity.

Death benefit and the amount it was originally meant to pay out is £46,000. Obviously the forecast shortfall is large. We have savings to cover this, so my focus is on whether it is worth continuing with the policy or not.

The with profit bonus this year was just 0.5%. I know that bonuses have been lower in recent years and this is partly compensated by higher final bonuses. In addition, we should be entitles to a mortgage endowment promise of they estimate, between £4000 and £6000.

Would I be better off cashing in and reducing my mortgage or saving money elsewhere, or should I hang on to get that MEP?

TrickyDicky101

To provide any kind of meaningful answer you will need to provide what interest rate you are currently being charged on the mortgage, whether any overpayment limits are in place, and what the monthly premium into the endowment is.

Then a comparison of costs can be performed which you can take account of in your decision.

dunstonh

If you surrender, then the alternative not only has to cover the surrender costs but also the MEP and a reasonable growth rate (something around the 4% mark would not be considered unreasonable. However, you can adjust for personal preference).

Some older Std Life plans have a record of understating the likely outcome. We have seen projections that give example maturity amounts that are not possible as they are lower then the minimum guaranteed maturity. Std Life changed it since then by increasing it to the minimum but its still unrealistic and understating the likely. My understanding was that on some of their older plans, they project from the surrender value or they do not include the currently accrued final bonus figure. Never quite got the exact reason but either would be feasible. So, just consider how the figures stack up against the current values. Projections do not include the MEP.

flowrypot

We kept ours because it was cheaper than a new life insurance , I also saved money and overpaid a lump sum off my mortgage at the end of every year. No idea if it was the most efficient way but it suited us.

silvercar

TrickyDicky101 wrote: »

To provide any kind of meaningful answer you will need to provide what interest rate you are currently being charged on the mortgage, whether any overpayment limits are in place, and what the monthly premium into the endowment is.

Then a comparison of costs can be performed which you can take account of in your decision.

Mortgage is lifetime tracker at BOE+ 0.75%, so has been 1.25% for quite a while. No penalties for overpayment as is an offset mortgage.

Monthly premium is £60.

silvercar

So am I right in thinking that I am paying in £2880 more over the next 4 years and getting back the MEP which should be around £5k, so even losing out on the interest I could get elsewhere, it is worth staying with it?