Sell/keep Norwich Union Endowment?

tony.j

Hello all, been reading the forums/site for a long time but this is my first time to post asking for advice.

I'm thinking of selling my endowment policy, started in Aug 1999 with CGU Life, now owned by Norwich Union.

We've sold our house and are renting, so shortly our existing mortgage will be paid off and we'll be left with some capital. We plan on buying a property in the future as "first time buyers", so will use our capital and also start a whole new mortgage.

What I'm not clear on is if it would be beneficial to sell my endowment policy at this point to reduce the level of mortgage we'd obtain, or hang onto it and get a larger mortgage.

The policy details are thus:

Start: Aug 1999
End: Aug 2024
Premium: £127.65
Sum assured if no changes to policy: £71330
Surrender value including bonuses: £13385 (at 9th July)
Terminal bonus: £0
Norwich Union have told me that due to reorganisation with Norwich Union I may be eligable for some payment, but were retiscent about being specific about this (except to tell me that policy changes may reduce eligibility).

The policy includes critical illness cover and provides sickness benefit should I be off work for more than three months.

So, would anyone buy this policy, and who would I approach to broker it?

Or should I hang onto it?

Expected future mortgage to be of the order of £140k (keep endowment) or less than £126k (sell endowment).

Any advice would be greatfully received!

Regards,

Tony

EdInvestor

Do you have any maturity forecasts?

How much would it cost to replace the insurance benefits?

JoeK_3

Please see an Independent Financial Adviser (IFA)

JoeK

tony.j

I only have old forecasts from Sept 2005 (new ones in post):

@ 4% = 48,900
@ 6% = 63,600
@ 8% = 83,200

Unfortunately the insurance benefits only cover myself and not my wife (we got married after the policy was taken out) - we had to arrange top-up policies to cover the extra mortgage amount we ended up with and to cover her also. So in many ways life would be simpler with one policy rather than many disjointed ones like we have at the moment. (Does it sound like I'm trying to talk myself into selling it? )

JoeK_3

It sounds like it to me.

Post the latest projections please.

JoeK

Pobby

Compared to my own policy with Scottish Life,those figures are looking pretty good.My premium is only a bit less than yours and has been running since 1988!

dunstonh

You need more upto date info. NU have been doing well in recent times. You will also need to look at the mortgage promise value as well.

The projections do not include terminal bonus either.

spiritual

hi
you have a surrender value, do you have a current fund value?
have you tried other companies that may purchase the endowment as you may receive higher value than nu surrender value.
You need to bear in mind loss of life cover,you will have extra 125 month as well which could be redirected in savings/mortgage.








I am an Independent Financial Adviser.

Anything posted on this forum is for discussion purposes only. It should not be considered financial advice. Different people have different needs and what is right for one person may be different for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser who can advise you after finding out more about your situation.

tony.j

Spiritual, I don't have a current fund value, but I do have the latest projections and will hopefully be seeking offers on the endowment.

Current projections are:

At 4% £51700
At 6% £66600
At 8% £85900

As you point out, surrendering the policy would reduce the mortgage and free up £127.65 for monthly overpayments. Doing the sums shows that the policy would have to perform at 7% or better in order to match the total saving from having a smaller mortgage and overpaying (reducing the total interest paid to the bank). While I imagine it is quite possible that the fund may perform better than 7%, I'm also quite risk-adverse, and feel that selling the endowment is the way forward.

If I can sell it for more than the surrender value then the fund would have to perform better than 7% to break even.

What I don't know, and is a complete mystery to me, is how to find someone to make an offer. I presume this is usually done via a broker that will take a percentage or charge a fee, in which case I'm looking for advice on who would be best to approach.

dunstonh

You need to add the current terminal bonus onto the projections as it isnt included in there. You also need to add the mortgage promise value on top to see if that brings you up to target. You also have the special bonus coming with the dispersal of orphan assets.

Most NU endowments are likely to come in on target or damned close. (of course, no guarantees but more a case of estimating the likely outcome).

If you are relying on the projection figures alone, you are not basing your decision on all the data.

tony.j

I have some more information. (Policy may not work the same as other NU policies, as originally taken out with CGU Life).

The fund value is 12,008.87
There are no regular bonus on the policy.
There is a terminal bonus, projected at 1389.23, with no penalties.

Therefore the surrender value is the fund value + projected terminal bonus, IE 13396.10.

Promise to policy holders is a maximum of £5030.