Offer received for endowment policy from AAP

Narla

I've received a firm offer from AAP for my endowment policy.

The policy is a Standard Life one and is due to end in July 2011.

The surrender value is £10,560 and the minimum it will pay at maturity is £11,072.

The offer from AAP is £11,223.

Is this a good offer? Is it worth me cashing it in to avoid taking out a £10,000 loan over 5 years? Or shall I keep hold of it in the hope that I will receive more when it matures?

Any advice greatfully received!

Narla

I have just received 2 messages on my answerphone - one from AAP asing if I am interested in their offer on my endowment and asking me to ring them and another message from one of the other (4) firms who have also sent me a quote of almost £11,000 asking me to contact them and also stating that if I have a better offer they will do what they can to better it!

Does anyone know how these things work? Do they change in value on a daily basis? Is it likely that my policy is a good one and worth keeping hold of or is it still very much a risky business and should I take the offer now or wait a while to see if they offer me more?

If I accept now what is the likelihood of the policy depreciating or increasing in value? I know no-one has a crystal ball but I've never looked into this before and wondered what others experiences have been?

Any suggestions welcomed please.

EdInvestor

Narla wrote: »

The surrender value is £10,560 and the minimum it will pay at maturity is £11,072.The offer from AAP is £11,223.

Is this a good offer? Is it worth me cashing it in to avoid taking out a £10,000 loan over 5 years?

They are offering you a 6.3% premium over the surrender value.This suggests they don't think the policy will do that much better than the projections.

What is the likely interest rate on this loan you would have to take out? And what interest rate are you paying on your mortgage?If higher than around 4.5%, then you will probably do better to sell the endowment, as the Std life WP fund is thought unlikely to deliver a high return than that.

Narla

Thanks for your reply EdInvestor.

The interest rate on a loan would be 6.3%.

This endowment policy was to originally pay back £18,000 and it costs me £23.68 a month. This has been great to keep the payments on part of the mortgage down but of course it will have to be paid back in the end. My £55,000 mortgage is currently part and part and in the new year I will have to change to a new deal as my 3 year fixed rate comes to an end so then I will put it all on a repayment mortgage.

Thanks, Narla

Griptool

Narla

If you invest the money received in a building society account and also the future monthly payments (don't forget to compound the interest and remember the tax) do you get near the planned maturity value?

If the answers yes, take the money NOW.

Also check Surrenderlink for a quote, they were the highest offer by some way on two of the three policies I'm selling.

Narla

Thanks for that Griptool.

I would never be able to work out what you suggested - I'm not even sure what you mean by compound the interest and would never be able to work out the tax!! BUT I will certainly check out Surrenderlink for a quote.

Thanks for the advice.

Griptool

Try this for the compound interest (also check out NS&I index linked tax free bonds for the savings vehicle - IIRC 1.15% above RPI TAX FREE)