Surrender / selling Prudential endowment

geomot

I have a Scottish Amicable endowment (now Prudential) which I am thinking about selling / cashing in and chucking the sum I get into my mortgage.

At the moment it is just a savings policy it was tied to a mortgage but hasn't been for years.

Policy is with profits fund but was one of the "low cost" which needed a very high return to pay off (I was a 22 year old numpty when I took it out).

Any thoughts:-

Started 28/02/1992
Finishes 28/02/2017

Original target sum £28,450

Monthly payments £38

Current surrender £11,150

Predictions

4% 20,700
6% 24,400
8% 28,700


I've done a "brute force" numbers type calculation and it seems slightlyt better to keep the policy but peoples thoughts would be nice to have.

EdInvestor

What interest rate are you paying on the mortgage?

geomot

Currently 6.33% fixed for three years.

dunstonh

What is the current final bonus on the plan?

geomot

Sorry don't have that.

EdInvestor

geomot wrote: »

4% 20,700
6% 24,400
8% 28,700

If you cashed it in and used the lump sum to reduce the mortgage immediately, using the premiums to overpay it to maturity @6.33%, your total return would be 26,910.That's a guaranteed return.

The Scot Amic WP fund is reckoned likely to produce a consistent 6% return, which would give you 24,400 at maturity (including terminal bonus).The policy does of course include free life cover.

As is the case with many endowments these days, the premium you expected at the start for taking a risk has gone.Indeed the possibility is that you could make more money by going the guaranteed route.

dunstonh

Unless you know what the final bonus is, any calculation is worthless.

Scot Am hit target with 96% of their endowments last year and expect 100% this year and going forward. That isnt guaranteed but they do have a good track record and their surplus payments are getting bigger.

which would give you 24,400 at maturity (including terminal bonus).

There is no mention of terminal bonus. I looked at a statement on one recently and it isnt included in the projections.