Maturing Endowment Savings Policy

Logen

I originally posted on the "Mortgage and Endowments" board, but it has been suggested that posting on the "Savings & Investments" board might elicit a better response.

So here's an outline of the situation together with a couple of questions:

I have an endowmentpolicy due to mature soon after 42 years of paying in £15 a month. The endowment was taken out with Commercial Union, which later became part of Norwich Union and eventually Aviva, as a savings vehicle called Wealthmaker.
The maturity value including all bonuses will be just under £80,000.
I'm quite happy with this and I've worked out that this is equates to an annual growth of approx.8.7%.

What i would like to know is:
a) Is this a good rate of return or not? (I am aware that the policy included life cover and there would be a cost for that)
b) What would an imaginary pot funded at the same £15 per month and invested in a UK all share tracker be worth today? (with dividends reinvested)

AnotherJoe

FWIW i recently downloaded some data and did an analysis on the FTSE all share. IIRC it turned out that return since 1985 or so was about 9.5%, that was total return from growth and income.

Since you've had nearly 9% plus life cover, I'd say that seems very reasonable for a UK all share which probably back then is the sort of thing people would have gone for, though now few would just have UK only

If you plug £15/m, 9.5% into a compound growth calculator like this
http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php
It comes to £101k (rounded)

But then you'd have to decrement that by the charges because even a low cost simple tracker would not return the exact same as its index, its always less. Charges noways can be very low, but 42 years ago I wouldnt be surprised if they were 2% or more. So if it was say an average of 1.5% then the growth factor should be 8% which comes to £62k

So personally I think you've had a great deal, a significant amount of money from a trivial monthly sum and in line with the index you reasonably might have chosen at the time ..... now had you put it in a US tracker or global fund .... but lets not go there

dunstonh

I'm quite happy with this and I've worked out that this is equates to an annual growth of approx.8.7%.

Yours would have had tax relief for most of the period. That would have helped a lot.

a) Is this a good rate of return or not? (I am aware that the policy included life cover and there would be a cost for that)

Compared to what? The options available today are very different to those available 20 years ago let alone 42.

b) What would an imaginary pot funded at the same £15 per month and invested in a UK all share tracker be worth today? (with dividends reinvested)

Does it matter? A UK all share tracker would be higher risk from an investment point of view as well as poor quality investing. So, its not something you would likely have been in. The endowment would be taxed internally but the UT/OEIC would have been taxed externally and you started it before the days a immediate access tax wrapper and in a period of higher charges than today.

You have had low/medium risk investment that has done a good job. You wouldnt have had access to many other alternatives at £15pm. So, no point trying to estimate what they could have provided. Just be happy its done its job.