Standard Life

marvin666

Can anyone please advise.

I am in a motgage tie in until May 2008, when I then intend to pay it off in full.

I have a Standard Life with profits policy that I pay £51 a month into. The plan has been running for 20 years and currently has a surrender value (with Aug bonuses), of £21000. I have had an offer of £21300 if I sell it on.
My question, am I best to keep the policy until May next year, or sell it now and deposit the amount in a Interest account, together with the £51 a month Ill be saving on the policy payments. (Sainsbury currently pay 5% net on Internet savings account.)

dunstonh

Standard Life have just set their interim bonus figures and they jumped up a fair bit on Monday. Any values you got before that will be wrong.

My question, am I best to keep the policy until May next year, or sell it now and deposit the amount in a Interest account, together with the £51 a month Ill be saving on the policy payments. (Sainsbury currently pay 5% net on Internet savings account.)

Standard Life is currently going better than 5%. Plus you would need to factor in the penalties in surrender/selling and the loss of the mortgage promise value.

EdInvestor

The issues are discussed here:

http://forums.moneysavingexpert.com/showthread.html?t=516056

marvin666

Thanks for the help.

Whats "mortgage promise value" , standard life have already told me that this policy is on Amber Alert.

dunstonh

Whats "mortgage promise value"

Standard Life gave a mortgage promise a few years back. However, they "broke" the promise and suspended it. However, those that had obtained a promise value get to keep it to that amount (no higher).

The idea is that if the policy falls short of target (after addition of final bonus) they will add the mortgage promise value to it upto a maximum of the target amount or the the promise value cap. i.e. if your mortgage promise value maximum was £5000 and your shortfall was £3000, then they would add £3000. If the shortgall was £8000 they would add £5000.

The mortgage promise value is a figure you can obtain by ringing standard life. It is not taken into account on any projections or current/surrender values. If you surrender the policy, the mortgage promise value is written off by you. If you sell the policy, the person buying benefits from it.

policy is on Amber Alert.

Doesnt really mean anything. The shortfall projections only have to be £1 off target to be classed as amber (Norwich Union class everything as red alert). The projections do not include current accrued terminal bonus or the mortgage promise value.

EdInvestor

Some people whose policies developed a shportfall in 2000 were given a 'mortgage promise" along the lines that if the WP fund returned 6% a year until maturity the company would make sure the endowment paid off the mortgage.

The promise has since been watered down, not least because of the disastrous loss of the free assets in 2002-03.You can call up and ask if it applies to you.

As far as your original query goes, if you wait until next May,you will be due the February additional reversionary bonus FWIW - the August one has just been paid and included a bit extra added onto the terminal bonus from the estate (hence the reduction in the premium offered by the TEP traders, formerly around 5% of policy value).The very small premium suggests they don't see much hidden extra future value in there and that the exit penalty (if any) is very low.

On the other hand if markets go down, the value of your terminal bonus would be reduced such that you might have wasted all your additional premiums.Or worse.
How big is the terminal bonus component of the surrender value?That's what you could lose if markets crashed big time.Standard life hasn't got any money left for "smoothing" in bad years, so you couldn't expect much help there.