Winterthur (Colonial Mutual) Endowment - cash in, sell or keep? Any help appreciated.

Two_Ton_Tess

I am very near the end of my fixed rate mortgage (4.99)and as part of my rethink of my finances, I am looking at my options for the following endowment policy:

Winterthur(originally Colonial Mutual) unit-linked with profit policy.
Maturity date: July 2014
Monthly payment: £50.83
Paid to date: £8538.44
If continued to pay to maturity cost would be: £12809.16
Winterthur have offered me £8235.45 for policy
Guaranteed pay out: £11727
This policy does include life assurance.
If I continue, Winterthur are projecting a 5% a year increase leading to £16,000 at maturity. Terminal bonus is currently 13% which I'm thinking must be included in the projection. (Not mentioned in their letter).
As this is unit-linked I understand that it may be difficult if not impossible to sell.
My new mortgage is likely to be a 6.2 tracker with no penalties for additional payments or early repayment. I currently have £55500 outstanding, £38,500 endowment and £17000 repayment. So, I'm thinking, take out new mortgage as £26000 endowment (have other endowments with Scottish Mutual that are heading for target, thankfully)and £29500 repayment, cash the Winterthur policy, pay £8250ish to mortgage, reducing amount outstanding to £47250. Is this sensible?

dunstonh

If I continue, Winterthur are projecting a 5% a year increase leading to £16,000 at maturity.

That doesnt mean a thing. The projections are examples only and do not necessarily reflect the real returns. Investments that consistently return 15% a year still use 6% or 7% and a certain provider on zero bonus for the last 6 years still uses 6% on their projections.

Terminal bonus is currently 13% which I'm thinking must be included in the projection. (Not mentioned in their letter).

You cannot assume this as some include it, some dont.

If you have access to the winterthur unit linked range of funds, then it could be worth keeping as there as some good options in there. It would depend on the charges but the option needs to be considered.

have other endowments with Scottish Mutual that are heading for target, thankfully

One assumes that the Scot Mutual endowment is unit linked and not with profits as their with profits fund is generally awful.

Two_Ton_Tess

Thank you Dunstonh. I will not dismiss the policy as a bad thing just yet. I don't know what you mean by charges...I'm pretty ignorant of how these things work....probably obvious by my blind faith in Scottish Mutual. Pretty sure these are not unit-linked but with-profits. They only have one year left to run though so I in my hazy little world think they are okay. Could I have been worrying about the wrong policy?

dunstonh

In honesty, I think they are both likely to be poor but I am basing that purely on gut instinct and not fact. If there is access to unit linked funds then I would be more comfortable with them but if you only have access to with profits, then I would be more concerned. You should get them reviewed ASAP.

Two_Ton_Tess

Thanks very much for your help. I will have the policies reviewed as you suggest. Not really the answer I expected but that will be why I'm not a Financial Adviser! Thanks again.