scottish provident endowment - sell or keep?

madbenns

Hi, I would be grateful if anyone out there can help us please. We have an endowment with scottish provident which my husband and I took out in sept 1989. Originally it was to pay off a mortgage of 57k but we moved house and changed to a repayment but kept endowment going in the hope of paying off mortgage early.
We have tried to go down the route of misselling but the firm that originally sold it to us ceased to be an IFA in 1993 when they withdrew from FIMBRA, (we tried the Financial ombudsman but they were unable to help either as the firm would not give them jurisdiction voluntarily).
After several years of no bonuses (since 2002) we have been looking at cashing it in. Would this be the best route to take? On one hand we keep thinking that there are only 7 years to go but on the other hand things dont look that good re no bonuses over the past 5 years. Details are:
low cost endowment taken out sept 1989 due to end 2014, sum assured 18753, minimum death benefit 57000. Bonuses to date 12682. Surrender value 23707.
Would really be grateful for views as really stuck on what to do.

JoeK_3

Are you sure about the surrender value of £23,707?

JoeK

madbenns

joek

yes as @ 6.08, why?

JoeK_3

Could you find out if the figures include terminal bonuses.

Scottish Provident policies are poor investments and it could pay you to look at alternative ways to invest.

What interest rate do you pay on your existing mortgage?
Do you need the life insurance?

JoeK

EdInvestor

More info needed

Guaranteed sum assured
Declared bonuses
Surrender value
Monthly premium
Maturity date
Maturity forecasts
Interest rate payable on mortgage

madbenns

rang scottish provident this morning and they said that surrender value does not include terminal bonus as you wouldnt get that unless you let it run it's course.
Other answers are:
Guaranteed sum assured: 18753
Declared bonuses @ dec 2006: 12682
Surrender value: 23707
Monthly premium: 85.76 (was low start with 1st year @ 42.88, 2nd @ 51.45, 3rd @ 60.03, 4th @ 68.80, 5th @ 77.18 till 6th year when premiums reached 85.76)
Maturity date: September 2014
Maturity forecasts which I think is the same as Projected final amount: @ 3.5% each year = 32,100: 4.75% each year = 36,100: 6% each year = 40,600
Interest rate on mortagage 5.29% until 2010
Life insurance not critical as hubby (main breadwinner!) covered by firm at 3x salary
Thanks guys I really do appreciate your input on this

EdInvestor

madbenns wrote: »

rang scottish provident this morning and they said that surrender value does not include terminal bonus as you wouldnt get that unless you let it run it's course.

I'll bet you they are saying this because there is no TB amount in the surrender value, it has all gone.

Other answers are:
Guaranteed sum assured: 18753
Declared bonuses @ dec 2006: 12682

This means that you are guaranteed to get 31,435 back if you just keep paying the premiums.Note that this is virtually the same as the projection at 3.5% growth. AFAIK the Scot Prov fund is invested mainly in bonds ( to cover these guarantees) so this is the likely performance you can expect. So littel extra TB in prospect.

Surrender value: 23707
Interest rate on mortagage 5.29% until 2010
Life insurance not critical as hubby (main breadwinner!) covered by firm at 3x salary

If you cashed the policy in and used the surrender value to reduce the amount owed on the mortgage also increasing the mortgage payment by the endowment premium amount to maturity, then your return would be 42,752, around 10k higher than if you do nothing. This assumes nothing spent on life cover and that interest rates on the mortgage stay much the same.

Both routes are risk free.It seems pretty obvious which one will be best in this case.

For someone with health issues,who would have to pay a lot for insurance or couldn't get it at all, and was using the policy as a low risk part of a portfolio, rather than to repay a mortgage, this endowment might be worth keeping because of its high guaranteed value and free insurance.

madbenns

thanks very much edinvestor. Given us something to think about!:beer: