Endowment maturing soon, should I surrender?

MoodyBlue_2

Hi all

I'm after some advice regarding our endowment which is due to mature in June later this year....

Same as most in our situation were promised enough to buy a yacht with the leftover funds way back in 1993!

We've accepted that was bull and moved on from there, but the potential swing between high and low projected payout has me concerned.

I called last week and was told that, assuming no major issues, I'd be looking at a payout in the region of £26,300

I've called back today with another query and I was told that £26,300 is the high projection and £18,700 is the low projection; my payout could be anywhere between these two figures.

Additionally, my surrender value on the policy is around £25,500 at the moment.

Given the huge potential swing between high and low values I'm now considering cashing the policy in early.

I did try to press on recent policy performance for any indication of likely swing but they weren't able to provide this, so I have a £7,600 swing to consider against a surrender value of around £800 less than the high projection.

Any thoughts greatly appreciated.
MB

dunstonh

Same as most in our situation were promised enough to buy a yacht with the leftover funds way back in 1993!

In 1993, no endowment had ever fallen short and maturities back then were coming in around 3-4 times the target value. No-one predicted the events that were to follow. However, you are better off with the shortfall than the surplus. So, its not all bad.

I've called back today with another query and I was told that £26,300 is the high projection and £18,700 is the low projection; my payout could be anywhere between these two figures.

That is not true either. These are just examples using two figures. You could get back more or less than these.

I did try to press on recent policy performance for any indication of likely swing but they weren't able to provide this,

The call centre staff dont hold the knowledge or regulatory permissions to get into that sort of discussion.

Any thoughts greatly appreciated.

No-one can answer your question as it means predicting future returns. We also do not know the basis of your projections. were they monetary growth basis (no factoring of inflation) or SMPI basis (inflation included). Were the rates realistic or completely out of sync for the type of fund(s) you have. What funds do you have and what alternatives exist (a fund switch may be all that is needed).

AnotherJoe

As long as there's no bonus associated with it, I'd say yes surrender because it's far likelier to fall 10 or 20 % due to some overblown panic than rise the same amount. Rises gradual declines precipitous. As you have no time to recover from for example the panic of a couple weeks ago, cash it in.

GDB2222

Surely, you can get a bit more information? What is the guaranteed sum assured on maturity, and what are the accumulated guaranteed bonuses? Add those two together, and that's the minimum payout guaranteed under the policy.

silvercar

Also check if there is a MEP (Mortgage endowment promise) this would only pay out if you held the policy til term.

MoodyBlue_2

Thanks for responses so far.

Basic sum assured is £12,250 and bonuses accrued so far are just over £6,000 so minimum guaranteed figure isn't that far below the low end projection stated earlier today.

Despite pushing, the lady I spoke to today wasn't really prepared to provide any further information, stating only that I should consult an IFA.

Based on the best and worst case scenarios (as they stand at the moment, appreciate that they can move further, up or down) I'm thinking that surrender is probably the best option.

Certainly baaed on today's conversations, the fact I'll never be able to find out what the ultimate payout would be and whether or not that's a good or bad decision, makes it a little more appealing. Cash in and move on I think.

MoodyBlue_2

silvercar wrote: »

Also check if there is a MEP (Mortgage endowment promise) this would only pay out if you held the policy til term.

I've not asked specifically regarding this, but been told a number of times so far that there are no other 'bonuses' that would be added to the figures quoted.

I will ask the question though, just to be 100% sure. Thanks.

MysteryMe

If I was in your shoes I would wait until it matures, it is only a few months away especially as all you have is figures over the telephone from people who may not really have the knowledge to give you correct information.

TBH Why give it up now after paying in since 1993?

silvercar

MysteryMe wrote: »

If I was in your shoes I would wait until it matures, it is only a few months away especially as all you have is figures over the telephone from people who may not really have the knowledge to give you correct information.

TBH Why give it up now after paying in since 1993?

I tend to agree. In fact, this is what I did and the endowment came in a few thousand more than expected.

GDB2222

MoodyBlue wrote: »

Thanks for responses so far.

Basic sum assured is £12,250 and bonuses accrued so far are just over £6,000 so minimum guaranteed figure isn't that far below the low end projection stated earlier today.

Despite pushing, the lady I spoke to today wasn't really prepared to provide any further information, stating only that I should consult an IFA.

Based on the best and worst case scenarios (as they stand at the moment, appreciate that they can move further, up or down) I'm thinking that surrender is probably the best option.

Certainly baaed on today's conversations, the fact I'll never be able to find out what the ultimate payout would be and whether or not that's a good or bad decision, makes it a little more appealing. Cash in and move on I think.

Will the insurers tell you what percentage terminal bonus they are paying on 25 year policies maturing at the moment? If so, you can work out a precise payout amount on the (admittedly fairly big) assumption terminal bonus rates won't change between now and your policy maturing.

I strongly disagree with AnotherJoe, by the way. Insurers try to keep terminal bonuses fairly steady and absorb market fluctuations in the short term. Besides that, the with profits fund is a diversified portfolio, and only a proportion is invested in shares. So, a 20% drop in share prices will not affect the underlying fund value by anything like that much and it may not affect your payout at all.

You can find out how the with profits fund is invested. For example, here are details for one company chosen at random:
https://www.lv.com/investments-advice/with-profits/asset-allocation

You can see there that LV has only half its funds in shares.

Besides that, surrender values tend to have a bit of a penalty, so I'm a bit shocked at the advice to take a surrender value so shortly before maturity.

AnotherJoe

GDB2222 wrote: »

Will the insurers tell you what percentage terminal bonus they are paying on 25 year policies maturing at the moment? If so, you can work out a precise payout amount on the (admittedly fairly big) assumption terminal bonus rates won't change between now and your policy maturing.

I strongly disagree with AnotherJoe, by the way. Insurers try to keep terminal bonuses fairly steady and absorb market fluctuations in the short term. Besides that, the with profits fund is a diversified portfolio, and only a proportion is invested in shares. So, a 20% drop in share prices will not affect the underlying fund value by anything like that much and it may not affect your payout at all.

I would also strongly disagree with me if this has a terminal bonus.
According to the OP it doesn't. Does it now appear it might ?
Maybe I misread. If it has any sort of terminal bonus I definitely would hang on.