Should I cash in endowment that matures June 2019 before Brexit?

simno999

Hi,
This is my first post in this forum...

I have an endowment policy (not with profits, no bonuses on completion) that matures June 2019.

It is currently £15k short of its target of £77k. I have covered its shortfall from other investments.

I am thinking that I should close the endowment now before any potential drops due to Brexit in the coming months rather than riding it out and waiting until it matures.

My concern is that if there is a major drop that it will not have time to recover before it matures. Closing now will save me about £1k from the remaining monthly payments. I know I will lose potential death cover which equates to the shortfall. The fund invests 35% in UK equities which I have read is most at risk during Brexit. If there is any growth between now and June 2019 it will probably be minimal.

Does anyone have any advice or insights that will help me make my decision? Is there anything else i should be aware of? I have already asked my provider for any early closure fees that would be payable.

Thanks
Simon

Nick_C

I'm not sure why UK equities would fall following Brexit. Many major companies listed on the LSE receive income in foreign currencies. If the GBP loses further value post Brexit, the GBP price of those companies could rise.

But cashing in now would give you certainty.

AnotherJoe

Its more likely it will rise than fall, and as said your "UK" equities are most likely companies who get most of their income from outside the UK so a fall in the pound means they rise, but if its going to keep you awake at night, cash it in.

simno999

Thanks for the responses AnotherJoe and Nick_C.

I can see if the GBP falls that the GB equities may rise based on your reasoning. But what about GB equities in general falling due to the uncertainties of Brexit? For me this seems likely.

I am no expert by any stretch. Maybe I worry too much.

kingstreet

Not WP, no bonuses etc. it's unit linked then?

What fund(s) is it invested in?

dunstonh

A good Brexit deal could see the values fall. A hard Brexit deal could see the values rise. Brexit isnt really playing out in the markets. It is Sterling that is taking the brunt of it. Global assets held in your endowment go up when Sterling falls.

That is why most of us saw nice jumps in value following the referendum result.

enthusiasticsaver

No magic ball when it comes to stock market and I would say that I don't think UK equities have been particularly badly hit so far since the referendum (although sterling has been hit which has actually seen my investments rise in value). So if the Brexit deal is a no deal or a hard Brexit there is no reason why your endowment policy will fall. The 65% non UK holdings may in fact rise.

If there is no maturity bonus though and you will save £1k in contributions and presumably the interest on £77k of your mortgage I would still consider it in that I like certainty and given the value is not likely to rise significantly in one year it may still be worth doing. No one really seems to know for certain what will happen re Brexit and the stock market so hedging your bets by cashing it in early is certainly worth considering. This is why we moved to repayment when it became clear endowments were not going to perform as promised back in the early eighties.

AnotherJoe

simno999 wrote: »

Thanks for the responses AnotherJoe and Nick_C.

I can see if the GBP falls that the GB equities may rise based on your reasoning. But what about GB equities in general falling due to the uncertainties of Brexit? For me this seems likely.

I am no expert by any stretch. Maybe I worry too much.

If you have some sort of general UK stock market fund, then there's no such thing as "equities in general". This is because the market and indexes and investments is massively skewed towards the top companies due to their massive size.

So something like the first 20 of the FTSE100 make up 50% of the whole FTSE100 and the first 50 make up 50% of the entire UK market. This means that your funds are mostly invested in a handful of mega corps that are worldwide and the small fry are almost literally irrelevant. Yes, some small company in position 1,576 in the FTSE All Share may be UK only and badly damaged by Brexit falling lets say by half but it will be 0.00000001% of the UK market whilst say BP which gets its revenues in Dollars is 5% (all numbers made up but just to give an impression of the scale) will rise by (say) 10% and this rise massively dwarfs any falls in UK-only companies.

Thrugelmir

AnotherJoe wrote: »

whilst say BP which gets its revenues in Dollars

More importantly BP declares it's dividends in US$. Falling £ has boosted dividends.

simno999

Thanks for all the responses.

Mindini1964

I have a similar problem if anyone can help my policy was worth 48000 but shortfalled but mine is with profits and if surrendered now is worth 37,778.00. It matures next November, will brexit affect my final amount? Or do I cash in??