should i surrender endowments? Mortgageman

dunstonh

I recommend you do get the SV as it will give you an idea of what you will lose at worse case. Also, it would confirm if you on one of plans that uses the surrender value to project from. ie, if the SV is the same as the CV.

wyatt_earp_2

DD - Can you take a look at my last post and give me your thoughts?

It seems my original post has prompted others to appraise their situations which has to be good as it's not a subject one should ignore.

Also, what is the going rate for fee based consultation with an IFA on this matter?

Many Thanks
Wyatt

PaulGeary

DD
I just telephone SL and the SV is exactly the same as the Current Value shown on the members login section of the SL web site.

I think I may have been a few quid out last week, my policy Current Value which is exactly the same as SV is 12732.45. Minimum was it 19955? or similar and original target 32000.

dunstonh

DD
I just telephone SL and the SV is exactly the same as the Current Value shown on the members login section of the SL web site.

I think I may have been a few quid out last week, my policy Current Value which is exactly the same as SV is 12732.45.   Minimum was it 19955? or similar and original target 32000.

Right, this is where it gets interesting.

You may have one of these plans that doesnt really have a true current value and as the SL systems cannot generate a true current value, they use the surrender value to go on. This means they are potentially under valuing your policy and creating a bigger shortfall than may be the case.

Things you need to check now.

1 - does your plan have a guaranteed sum assured. (often a third to a half of the life cover amount)? if so, what is it.

2 - what is the value of the annual/reversionary bonuses added so far?

3 - what is the value of the terminal bonus, if any?

If you can post back with those, we can get a much better idea if they are using a real value or undervaluing it.

I am shifting more to this course of action:

1) Using the redress in full to reduce the outstanding mortgage balance.

2) Keeping the SL policy until at least the conversion and review it then.

3) Overpay my mortgage by £25 per month to help reduce the balance at the end.

4) I am uncertain about the Prudential (PRU) policy - should i surrender it? After all, they have a very good track record on endowment returns.

What do you think? I suppose that i really want to avoid a shock at the end of the term.

Your posts got lost a bit didnt they However, its possible that the SL policy with gus is the same as yours so its info worth checking on your one too.

1 - yes, use any redress to reduce the mortgage. Common sense that but you will be surprised at the number that see it as a windfall and spend it on holidays etc.

2 - That is probably the most sensible option although it would be an idea to check what i have posted above is relevant to you/

3 - If you can afford to do it, then again, do it. However, if you have credit cards outstanding, you should pay extra into those first as the interest is higher on those.

4 - Pru have one of the best with profits funds out there. However, there is still no guaranteee of what you are going to get back. Personally, i would use the 6% projection on as guidence for the Pru plan.

PaulGeary

DD
The policy is a joint low cost endowment with a sum assured of £13376 and a minimum amount payable on death of £32000.
The latest statement I had up to feb 1st 2004 shows bonus added to plan is £6223. At Feb 1st the current value was £11726+£420 final bonus=£12147 but that has increased as this years premiums have been paid.
Rgds Gus

dunstonh

DD
The policy is a joint low cost endowment with a sum assured of £13376 and a minimum amount payable on death of £32000.
The latest statement I had up to feb 1st 2004 shows bonus added to plan is £6223. At Feb 1st the current value was £11726+£420 final bonus=£12147 but that has increased as this years premiums have been paid.
Rgds Gus

Ok, so lets look at whats guaranteed to pay out on maturity at the moment

£13376 (guaranteed sum assured)
£6223 (reversionary/annual bonus)
£19599 = guaranteed minimum.

The terminal bonus is not guaranteed.

You have a shortfall of £12401 with 7 years to go. So the figures stack up so far. On your endowment forecast, what was the 4,6 & 8% projections? If 4% is lower than £19599 then we know they are undervaluing the plan.

PaulGeary

On the SL secure site it is possible to see "What a plan may be worth at maturity", in my case

4%* 5.75% 7.5%
19,599 21,400 23,500

* 4% would accrue lower than guaranteed value

Apparently SL are only going to renegue on part of their promise to help on shortfalls and not all of it!!!!

In 1991 I joined the SL game and since then I have played to their rules (paid premiums promptly), however they have moved the goalposts on more than one occasion and I can't help thinking they may move the goalpsts again in the future.

So, my CV and SV are today worth 12732 and premiums due before maturity are 5624 = £18,400, with a minimum payout of 19,599.
It doesn't sound too good for a decent terminal bonus which if I do not take any action will leave me 12K shortfall.

I will have to get a couple of quotes from brokers to see what they would pay for the policy.
Rgds Gus

dunstonh

If there were zero bonuses added between now and maturity you get that figure. Although terminal bonuses are not guaranteed, you currently have one worth £420. So your current figure is £20,019. Yet Standard Life are projecting it to £19,500 if it grows at 4% but in reality if it grows at 0% it will pay out more than standard lifes projection at 4%.

Spot the problem with SL maturity projections? They are undervaluing the start point for projections because their system cannot generate a true current value and the surrender value is used.

We dont know what the future bonus rates are going to be but i would certainly defer any decision until after demutualisation as the average payout is going to be £1100 per policy and paying it into the policy is one of the options available to SL.

PaulGeary

DD
Many thanks for all your input, I suppose the bottom line is that unless I get an offer I can't refuse from an endowment broker then I will have to ride out the storm and hope for sunnier climes come 2011.

I have just had a Britannic policy mature and I intend to pay back 99% of this to my bank to help offset the SL shortfall, before the 'crash' I was hoping that I had a nice surplus on Britannic and SL, but that's life.
Rgds Gus

PaulGeary

DD
I just checked out my the current value of my policy and see that the Final Bonus is now £227.40, in February it was £420.50.

That is another 200 quid down the swanee!!!!!!!!!!!!!

I have not had a lot of interest from endowment brokers, given recent events with SL I don't suppose it's surprising.
Rgds