Do I cash in L&G Endowment please?

Jetlagged_2

I would be very grateful for any advice on whether or not to surrender our policy.

Mortgage £155000 now repayment @ 5.25% until April 2011

Legal and general 25 year
Basic sum assured £30167
Guaranteed sum assured £86191
Bonuses added £8140
Surrender value £24316
monthly premium £125.25
Maturity date 28 June 2019

Could not make sense of the vague answer when I asked them for projected targets
last written assessment of these in writing at April 2005 FWIW
4% £52800
6% £65400
8% £81100

I will still need some kind of life assurance
Might consider making it paid up if that would help
we are only allowed to repay 10% of the mortgage borrowing per year until 2011

Many thanks for any comments, I really appreciate your looking.

silvercar

interested in any answers on this as I have a similar policy.

The 2007 statement stated that underlying investments grew by 12% in 2006, 11% after tax, yet the bonus rates were a miserly 0.75% and 1.25%. The difference explained by "smoothing" -flattening more like!

Terminal bonuses are now declaring at around 94%, so that would only be doubling up the 0.75% and 1.25%.

I have sufficient life insurance elsewhere, so that is not an issue and can overpay the mortgage. Just wondering if its worth holding on til maturity in 2011.

Jetlagged, try to sell before surrendering.

shaunrc

Hi Guys

Before I post an answer for you I work as an IFA and am familiar with these type of issues.Please do not take my answer as advice as that has a technical industry meaning...............

When looking at this sort of thing one has to subdivide it into things we know and things we dont.

1. Life Cover
One of you needs this one of you doesnt.For the one who does the question is could you get it elsewhere and for how much? If you have had any health issues the life cover may be particularly valuable and in an extreme case may not be available elsewhere. So if you are going to sell or surrender arrange the new cover first.

2.Investment
I have just looked at Legal and Generals with profits fund.There are several versions but you are likely to be in the version with the structure
55% equities
24% fixed interest
21% commercial property

This is good news in that it is still operating as an investment vehicle and has the same type of profile you might have expected when you started your endowment.There are many others which bear no real relation to what they were when people first invested.


So in factual terms not a disaster and if you are not investment savvy then with some minor reservations it may turn out not too badly

What we dont know.

The problem with this type of investment is that it is hard to find out what they are doing with your money ( the figures above are in the past tense! ) and the whole structure is opaque. To look at this specifically the fund declares a bonus which can have a very tenuous relationship with what has been made. I see that you have quoted a 12% return and paying more like 2%. Over time this should average out but this does rely on you trusting them!

Also these funds have been paying for the costs of miss-selling quite often.In theory shareholders should be paying but in practice this has been a cost.

To answer you specific question the 6% £65400 figure you quote is calculated as follows. If they continue to invest your money including your monthly payments and get a return of 6% then they will return to you £65400.So this is a pure mathemetical calculation under rules set by the FSA as are the figures of 4% and 8%

As an opinion 6% should be achievable with this type of investment structure but there is no guarantee because of the smoothing process and what if the fund has to pay for other unexpected bills?

To answer the one about holding on until 2011. Usually if you leave early you get a lower bonus rate than from going to maturity ( otherwise there would be no traded endowment market....). So there is logic in holding on. What I cannot answer is what point in the smoothing cycle we will be as you may get more than your fair share or less, or purely by fluke the right amount!

So in terms of a right or wrong answer there isnt one. However hopefully you can now make a more informed decision.........