Tax if cashing in Endowment Policy early

mirdragon

Hi,

I have been onto my policy provider as they sent me a statement in early November which was for the year before and then finally sent me out the correct statement for this year.

The policy ends in 2 years time (26 Nov) and was taken out in 93 to achieve £21,840, but at the moment the policy is showing £22,300 as a surrender value if I were to cash it in now (which is lower than value for last year), and if I continue to pay in, I'll be paying around another £1,680 with the policy being only estimated at the moment to make £22,500 but there may be a shortfall.

As it is not tied to mortgage anymore as I switched it to repayment, if I cash it in now will I have to pay tax on it. I'm a basic tax payer and the provider has said it's a 'qualifying product' and no MVR is currently in place on it.

thanks
M

TadleyBaggie

Is there any terminal bonus if kept for the full period?

mirdragon

Hi,

This is what they stated for the policy this month - (the class the final bonus as terminal bonus)

Statement 8 Nov - provided details for year 2015 not 2016
Cash in Value = £22,510.70 (inc £8,250.69 final bonus)

Statement 18 Nov - for 2016
Cash in Value = £22,537.54 (inc 7,105.38 final bonus)

Statement 26 Nov - for 2016
Cash in Value = £22,547.17 (inc £7,108.26 final bonus)

Statement 29 Nov - 2016 cash in quotation
Cash in Value = £22,559.09 (inc £7,109.83 final bonus)

On all the statements they say Green alert, there is a low risk that your policy will have shortfall, but they believe it is on track to pay £21,840 but cannot guarantee this.

At maturity they are projecting a possible return of £23,300 as long as their investments grow. This is only £1,460 more than the policy needs, but paying in for the next 2 years will cost £1,680. They don't mention what the final bonus would be if went full term as they say they can't predict that and it may be lower than what currently being offered.

Also have free life assurance through my work which is 40% more than this would policy would provide

wjr4

It should be a 'qualifying' policy which means no tax on encashment.