Endowment Policy Matures in May But Value Plummeting Should I Cash In Early?

John905

Our Prudential Home Purchaser endowment (ex Scottish Amicable) is due to mature very shortly on 5 May. I've been checking the estimated values regularly and towards the end of Feb it lost £1300 in a matter of a few days as the coranavirus took its toll on the markets. It's estimated value continues to fall, albeit at a slower pace, but it is still not too far away from its target of £43,600. My dilemma is whether to bite the bullet and cash it in a few weeks early to avoid further depreciation. I realise that people cannot provide direct advice on what I should do, however having contacted the Pru today I would appreciate any thoughts on the following issues:

The Pru explained that if I cashed in before April 1 I would miss on the addition of this year's bonus and that the fund had been performing well this year. Is this correct?

They also stated that there would be no charges associated with cashing in early, apart from missing the year's bonus which will be added in April.

In light of this my gut position is to cash it in as soon as possible after 1 April. I suppose my main question is simply am I missing anything I should know about this strategy? Are there any advantages to staying put until it matures on 5 May? Any thoughts would be much appreciated.

John905

I forgot to mention that the endowment is split 50/50 between With Profits fund and Investment Linked funds.

dunstonh

Is it really plummeting or is that media style plummet?

 I've been checking the estimated values regularly and towards the end of Feb it lost £1300 in a matter of a few days as the coranavirus took its toll on the markets.
Most investments are broadly back to their early January values.  Not exactly plummeting.

The Pru explained that if I cashed in before April 1 I would miss on the addition of this year's bonus and that the fund had been performing well this year. Is this correct?
There is a bit of a lag on with profit funds in general.  The bonus season is due and 2019 was a good year.  

 Are there any advantages to staying put until it matures on 5 May?
Crystal ball job.

John905

Thanks for the reply dunstonh, much appreciated. In retrospect I was being a bit melodramatic with my use of the word plummeting. I was maybe over reacting to the estimated value dropping £1300 over an eleven day period and worried that this process would keep repeating until the maturity date on 5 May. Just to double check, if I decide to cash in after 1 April when the 2019 bonus is added do I stand to incur and losses or penalties other than the potential growth of the endowment from 1 April to 5 May?

dunstonh

If there is no surrender penalty, then you will get the surrender value on the day with no reductions.   

However, on maturity, there can be an additional review to increase the final bonus.  Whilst conventional with profits plans can be based on on an annual basis -  i.e. 1 day in the year can get you the full bonus and 364 days can get you no bonus, most conventional WP plans have matured by now.    You typically see unitised with profits or a hybrid conventional WP plan that accrues/removes final bonus on a daily basis and a policy review at maturity.   Some WP funds actually de risk for policies maturing in the year ahead.

If your endowment had a MEP (mortgage endowment promise), then you would lose that on early surrender.  I don't believe Pru/Scot Am did one but don't rely on me.