surrendering an endowment policy

remyroo

I have a Scottish Friendly (originally an MGM policy) Flexible Homebuilder plan which is unitised linked. It is due to mature in 4 years but i am considering surrendering it now unfortunately i am unable to sell it as it is a non profit policy. It has increased in value by £6000 in the last 18 months and is now worth £33000 (should have paid £55000 at maturity). Is it worth paying another £5000 into it in the hope its worth over £40000 in 4 years, I've been told there is no final bonus. my concern is that as its unitised linked if the market drops I may not get what its worth now.

AnotherJoe

This is crystal ball time.
Only you know the level of risk you are prepared to accept. Thats what its all about.
If its making you anxious, pay it off now.

If you dont normally deal with shares/investments and have the risk appetite, then probably you are just best off, simply for peace of mind, and not necessarily the best financial outcome, paying it off now.

Then making the payments you were making towards your endowment, as overpayments to your mortgage (or, partly or all into a pension if your pension provision is low ).

dunstonh

unfortunately i am unable to sell it as it is a non profit policy.

There is nothing unfortunate about that.

Is it worth paying another £5000 into it in the hope its worth over £40000 in 4 years, I've been told there is no final bonus.

This has the potential to hit target. It has the potential to miss. Without a crystal ball it is impossible to say but this one doesnt appear that far off in the scheme of things.

my concern is that as its unitised linked if the market drops I may not get what its worth now

Unit linked tend to be better than with profits. However, regardless of version, neither could address that concern as they will have periods between now and maturity where the market drops. Probably several.

remyroo

Thanks for replying. I think I'll hold on to it for now and keep checking its progress.

remyroo

Hi. I've just received an endowment update from Scottish Friendly. The illustrations show the growth at 1.5% projected final amount £38,089 and growth of 4.5% £43,343. They say their view is that 4.5% is a reasonable assumption however more conservative assumptions may be appropriate in the last 5 Years.
At the moment the policy is worth about £35000 and has another 4 years to run at £99 per month.
Do you think they are being overly cautious?
I would hate to surrender it now on these assumptions and find that in 4 years its worth £50000.

TrickyDicky101

AnotherJoe and Dunstonh have explained to you - it completely depends on the market and your attitude to risk. If there's another bull run up to maturity - brilliant! You'll do well to hold on. If there's a crash you could get back a lot less than the value today.