1998 endownment, £20,000 short

EdInvestor

RSA endowments are very unlikely indeed to improve as the funds have been closed to new business and sold off. They are more likely to go done to 1% or even 0% than up to 6%.

What bonuses did your endowment earn in the last couple of years, that may be an indicator?

The projection figures are quite irrelevant to the actual result.The figures are mandated by the FSA - all insurers must use the same ones.They don't tell you anything at all about what the actual performance might be.

Moncs_2

On my 2004 Bonus Declaration form it says

Guaranteed Minimum Death Benefit - £60,000
Maturity Date - 01/04/2023
Amount on which basic bonus is calculated - £27,222
Bonus Earned to 31/12/2003 - £1795.76
New Bonus Added This Year - £72.54
Total Bonus Earned to 31/12/2004 - £1868.30

So, going by those figures, you would recommend me cashing in my endowment and putting the settlement sum of £6262 into a high interest savings account and still obvioulsy pay the £110 which I pay monthly to the endowment into the new account?

EdInvestor

Hello again Moncs,

Earlier I said:

If you took the surrender value of 6262 and put it in the bank at 4% paying in your premiums as well to maturity you would end up with 47,267.

The figures you now quote seem to include the missing Guaranteed sum assured and attaching bonuses (that's the 27,222 plus the 1,868), which make a total of 29,090.This is the Guaranteed value, the minimum they will pay you when the policy matures, assuming you keep paying in the premiums. Added onto this each year will be that year's bonus which as you can see last year was a derisory 72.54.

By comparison if you put the surrender value of 6262 in the bank at 4%, you would earn 250 pounds in interest for one year alone, more than three times as much.This money will then compound up over the years which explains the big difference between the estimated final value of the savings @ 47k versus the guaranteed final value of 29k on the endowment.

Note that if you overpay the money into your mortgage, you will "save" at the mortgage interest rate, which is usually higher than the deposit rate and is also not taxed.

I leave it to you to decide whether to bother with this endowment any more.:)

angela110660

Moncs wrote:

I am in the same boat, I took out an endowment in 1998, and its forecast to be a shortfall of around £17k. I have been told that it could rise but not to expect miracles.

I got 3k compenstation a few years back, and I am hoping to change my mortgage to a repayment one very soon, I also hope to continue with teh endowment, so when it does mature the lump sum will be all mine.

Interesting to see that your only paying £81p/m for a £72k endowment, I pay £110p/m and mines was meant to pay out £60k. Who is it your with?
I'm with Royal & Sun Alliance.

Interesting to see what you are all paying out. We are supposed to end up with a £61k endowment (we'll be lucky to get half of it in 2018). We pay £83 p/m for ours. Feel like leaving it paid up and putting the money in an ISA as I reckon that we are getting about the same rate of return. How did we get sucked in? The insurance companies (ours Standard Life) seem to have really fallen out of love with the endowments yet they were the best thing since sliced bread when we bought it. (allegedly!) We have made our mortgage half repayment/half interest only to try and help the situation by the way.

Moncs_2

Editor wrote:

Hello again Moncs,

Earlier I said:




The figures you now quote seem to include the missing Guaranteed sum assured and attaching bonuses (that's the 27,222 plus the 1,868), which make a total of 29,090.This is the Guaranteed value, the minimum they will pay you when the policy matures, assuming you keep paying in the premiums. Added onto this each year will be that year's bonus which as you can see last year was a derisory 72.54.

By comparison if you put the surrender value of 6262 in the bank at 4%, you would earn 250 pounds in interest for one year alone, more than three times as much.This money will then compound up over the years which explains the big difference between the estimated final value of the savings @ 47k versus the guaranteed final value of 29k on the endowment.

Note that if you overpay the money into your mortgage, you will "save" at the mortgage interest rate, which is usually higher than the deposit rate and is also not taxed.

I leave it to you to decide whether to bother with this endowment any more.:)

Editor, THANK YOU so much for your advice. Last two questions.

If (when) I decide to cash in my endowment, would I be better selling it onto one of these companies you hear about who buy endowments from you?

Lastly, If I did put the money into a high interest savings account, what level of tax would I have to pay on it?

EdInvestor

Hi Angela

angela110660 wrote:

The insurance companies (ours Standard Life) seem to have really fallen out of love with the endowments yet they were the best thing since sliced bread when we bought it. (allegedly!) We have made our mortgage half repayment/half interest only to try and help the situation by the way.

Demutualisation windfall on its way to you next year from Standard, so that should help a bit Best to leave things as they are until after that IMHO.

EdInvestor

Moncs wrote:

If (when) I decide to cash in my endowment, would I be better selling it onto one of these companies you hear about who buy endowments from you?

Lastly, If I did put the money into a high interest savings account, what level of tax would I have to pay on it?

You can always try to sell it Moncs, but I don't think anyone's buying RSA endowments any more

Tax on savings is 20% ( hence may be better to overpay the mortgage with some of the money.)

Tax free in an ISA so I'd max that out first.

Moncs_2

Editor wrote:

You can always try to sell it Moncs, but I don't think anyone's buying RSA endowments any more

Tax on savings is 20% ( hence may be better to overpay the mortgage with some of the money.)

Tax free in an ISA so I'd max that out first.

Thanks again, do you know of any companies that deal with buying endowment's?

Also, how much saving's can you have in your name before the tax man can touch it?

angela110660

Editor wrote:

Hi Angela



Demutualisation windfall on its way to you next year from Standard, so that should help a bit Best to leave things as they are until after that IMHO.

thank you for that little bit of advice. What's another year?!