Cashing in my Endowment

BathMoney

I’m thinking of cashing in my endowment policy, perhaps putting the proceeds into savings or paying off part of my mortgage.

Have you any thoughts on if I should stick with it, pay it off or change the fund to spread risk? Also am a bit concerned about Brexit and how this may or may not affect the plan. Also am a Crohn's sufferer which may be why the cover seems so high.

It's a Homebuyer Extra Plan

The cash in value is Circa £26,700 (This value includes a final bonus of Circa £10,500 for investments in the Aviva Life & Pensions UK Limited With-Profit Sub-Fund).

Target Amount: £50,000

Start Date: August 1998

End Date: August 2023

Premium: Circa £90 monthly

Total Value of policy on July 2018: Circa £16,200
Total Value of policy on July 2017: Circa £15,300

Units are canceled to meet life cover Circa £150 monthly over the statement period
Units are canceled to meet serious illness cover Circa £200 monthly over the statement period

What policy might be worth:
Low rate: Circa £29,100
Mid rate: Circa £33,700
High rate: Circa £38,800

The policy is whole life so it doesn’t have a maturity date. The policy comes to an end either when it is surrendered or when a valid death claim is received.

The policy is a qualifying policy and therefore “on the event of a full claim on either surrender or death the policy proceeds will be tax-free and therefore an income tax liability will not arise”.

dunstonh

Also am a bit concerned about Brexit and how this may or may not affect the plan.

Brexit is known. So, most of the impact of Brexit is priced in. Plus, Brexit is playing out mostly in the exchange rate of Sterling. A bad brexit would see global investments within your fund increase in value.

The policy is whole life so it doesn’t have a maturity date.

That also means it is not an endowment policy.

The policy is a qualifying policy

That means it is not a whole of life assurance.

So, we have conflicting information here. It is possible it is an endowment policy with a conversion option. I dont recognise the product but to be qualifying, it cannot be a whole of life assurance and to be an endowment, it could not be for whole of life.

ffacoffipawb

dunstonh wrote: »

I dont recognise the product but to be qualifying, it cannot be a whole of life assurance and to be an endowment, it could not be for whole of life.

Qualifying whole of life policies do exist, why do you think otherwise?

BathMoney

Hi dunstonh thanks for responding so quickly, am only copying out what I have in front of me, or e-mailed comments from Aviva based on the questions I have asked them.

The policy was originally taken out with Freinds Life (if that helps).

They have even said there will be a shortfall and included a "Dealing with your endowment mortgage shortfall" document provided by the money advice service.

I can also see references like "It combines both your endowment review and policy update."

What can I ask Aviva in order to come up with clarification on your point?

lindabea

BathMoney wrote: »

The policy is whole life so it doesn’t have a maturity date. The policy comes to an end either when it is surrendered or when a valid death claim is received..

If the policy is whole of life and no maturity date, why do you say it has an end date (presumably a maturity date) of August 2023? The information is somewhat conflicting.

BathMoney

@lindabea Sorry, the statement actually says "Target end date".

That portion you have quoted is copied from the Policy information, under additional information, when I inquired about possibly cashing in the policy.

I could scan in the docs to prove this, but it sounds a little like this won't help.

Not sure what my next steps are, has anyone any insights on whether I should cash in or stick with the policy given the info I have provided?

Are there any other questions I could or should ask my provider to help me work out whether I should cash in or stick with the policy?

MovingForwards

Do you have stand alone life insurance? Any family relying on you to keep a roof over their head if you die?

Have you been paying anything off the equity of your mortgage or do you have something else lined up to pay it all off?

How old are you? What is your income stability (ie do you have a job)?

xylophone

Re qualifying policies

https://www.gov.uk/hmrc-internal-manuals/insurance-policyholder-taxation-manual/iptm2020

BathMoney

MovingForwards wrote: »

Do you have stand alone life insurance? Any family relying on you to keep a roof over their head if you die?

Have you been paying anything off the equity of your mortgage or do you have something else lined up to pay it all off?

How old are you? What is your income stability (ie do you have a job)?

I am mid 40's self employeed, wife and 2 kids, we have a repayment mortgage £150,000.

So the policy wouldn't be enough to cover the mortgage if I died.

Have Chrons so difficult to get stand alone life insurance, part of what I want to do is sort the endowment question so I can look at what I can do to cover the balance over the full term of the mortgage.

My wife is a teacher so we manage, but I want to ensure we are putting our money to work in the best way possible.

Also want to start thinking about adding to pension, but it seemed to me that sorting out the endowment was a good place to start.