More Endowment selling do I don't I?

squires55

Hi all,

this seems to be a popular subject at the moment so thought I would add to the requests for advice!

I currently have 2 endowment policies to support an interest only element of £26,000 on a mortgage that is currently £83000 (rest is repayment). These endowments where originally to cover £52000 of morgtgage but I have reduced that amount as I've moved house/remortgaged.

We are looking to fund some home improvements but our savings will not cover the required cost of these (approx £10K), so thought of the possibility of selling one of the endowments and then making overpayment on the mortgage to cover the shortfall caused by the loss of endowment.

Policy 1 was taken with Colonial Mutual in July 1991 and is now Winterthur;

Surrender value is £8856
Sum assured is £11,616 increased by bonuses
maturity date 06/07/2016
Guaranteed benefit £32000
Premium £42.64 monthly

Policy 2 was taken with Friends provident in July 1994 ;

Surrender value is £6978
death benefit 20250
maturity date 16/07/2016
Premium £40.25 monthly

So, if I was to sell a policy, which is the best one to sell? Is selling the best option?

thanks in advance

Shaun

EdInvestor

Post the following additional infor:

guaranteed sum assured
declared bonuses
maturity projections

interest rate payable on mortgage

Is the FP poilcy with profits or unit linked (or perhaps a combination?)

squires55

Interest rate on mortgage is 4.69% fixed until Aug 2011

Policy 1 - Winterthur
Sum assured is £11616
Target amount is £32000
maturity projections
3.25%
16400
5%
18500
6.75%
20800

Declared bonuses £2900.10

Policy 2 - friends provident

Sum assured is £20250
maturity projections
4%
14200
6%
15900
8%
19100

No declared bonuses
policy is with profits

EdInvestor

squires55 wrote: »

Interest rate on mortgage is 4.69% fixed until Aug 2011

Policy 1 - Winterthur
maturity projections
3.25% 16400
5% 18500
6.75% 20800

If you surrendered this one and used the money to reduce the mortgage also increasing the mortgage payment by the amount of the endowment premiums you would end up with 19,137 at maturity, roughly equivalent to their projected performance at 6%.

Policy 2 - friends provident
maturity projections
4% 14200
6% 15900
8% 19100

If you did the same with this one, you would end up with 15,898 at maturity, very similar to their 6% projection.It's not really a clear cut choice, though you do have quite a lot more life cover included in the second policy.

Suggest you ask the companies for a breakdown of how their With profits fund is invested ( percentage in equities,property,bonds,cash).That will give a rough indicator of which is the correct projection to use.

Also, you could see if anyone will quote you a sale price for the Winterthur policy at https://www.apmm.org (They won't be interested in the FP policy as it's unitised WP).

ajoxley

Hi we are in a similar position and are following this thread and others with interest.
Our position is slightly different because we switched our mortgage to a repayment and have kept the endowment running as a savings policy.
When it comes to selling an endowment what are your views on companies that offer up 35% more ?
If we did decide to sell which company would be best to use?

EdInvestor

ajoxley wrote: »

When it comes to selling an endowment what are your views on companies that offer up 35% more ?If we did decide to sell which company would be best to use?

You need to differentiate between the companies who will buy the policy from you directly (good) and the ones who will only offer to find a buyer (not so good).The latter will often offer much more as a sweetener,but may take a very long time to find the buyer and charge you fees to withdraw from the deal - and in the meantime you have to keep paying the premiums.

Retired_I.F.A.

EdInvestor wrote: »

You need to differentiate between the companies who will buy the policy from you directly (good) and the ones who will only offer to find a buyer (not so good).

Rubbish! The ones that will offer to find a buyer are the ones who will get you the best purchase price by brokering it around all the buyers of endowments. These brokers are normally I.F.A.'s and will usually be paid a commission of about 3% of the purchase price by the buyer, You can negotiate a fee instead with most I.F.A.'s and have that 3% extra though you may find the 3% is taxable as income. Note that fees are paid for the work done sale or no wheras commission is only paid if the deal goes through and only cowboys try to get both off you. The choice is yours.

It will take them about a couple of weeks in all to get all the offers in perhaps another week of negotiating a better figure refering to what offers they have had and about a week perhaps two before the cheque hits your bank.

Do the same yourself and your not likely to get a better deal as most if at all any will offer that 3% more. They dont simply because most of their purchases come from I.F.A.'s so offering a policyholder more is ultimately going to cut down on the number available for them to buy.

The latter will often offer much more as a sweetener, but may take a very long time to find the buyer and charge you fees to withdraw from the deal - and in the meantime you have to keep paying the premiums.

Nobody offers any amount as sweetners. They say 35% is possible based on previous sales when in fact that figure can be anything from nothing to 60% more.(long time ago now but I sold a friends prov one for 55% more than the surrender value to a pension scheme advertising only in trade papes available to IFA's.)

EdInvestor

My post refers to TEP traders, not IFAs.There is no need to pay a fee to another intermediary - you can go direct via the site below and fill in just one form to get quotes from any traders interested.

www.apmm.org

It's efficient and quite fast, usually takes a few days to get the quotes in.You can negotiate directly on price.One trader holds auctions and will sometimes offer you a price, plus the opportunity to put your policy in the auction and see if it can be bettered.