No Crystal Ball

pipmoss

Hi Guys I hope you are all keeping well in these difficult times.
I have a Accelerated Investment Mortgage Plan with Aviva which matures in 2023.It is on track to provide the target figure £24700. Last year I paid in £1184 and the policy value has dropped by £864 compared to 2019 figures.The figures for  2019 £28443 down to 2020 £27579. I realise that we dont have a crystal ball but does anyone think that this downward trend will continue ?.The  cash in value is £27272 with charges of £307.35.
Would I be better off cashing in the policy and continue to put the monthly premium aside or do you think I should let this policy run its course ?.
Many thanks in advance

Thrugelmir

Investments flutuate in value. Are you able to redeem your mortgage penalty free at the current time? What rate of interest are you paying on the mortgage? 

pipmoss

Thanks for your reply
the penalty fee is £307.35
This is just an endownment policy . I changed the mortgae to repayment some time ago.
Thanks again

Thrugelmir

Well one option would be to encash the policy. Pay off the mortgage. Then use the remaining balance plus some of the cash freed up every month to boost your pension pot. 
Does your mortgage have an early repayment charge? 

pipmoss

Hi thanks for that. There is no fee to pay off my repayment plan early so this looks like a good option. Do you think that this type of endowment will recover or do you think it is just 'dead money' each month.

Thanks again

FrugalCat

Cashing in means you realise the losses. There's a reasonable chance the funds will recover their losses by 2023.
To cash in now is to expect them to fall further.

Which may not bet a silly opinion, but nobody knows at this stage. The world governments are trying to soak up all the defaulting debt by taking it on themselves.

Thoughts:
Scenario 1) The governments succeed in propping things up again, your fund would recover what it has lost by 2023
Scenario 2) The governments fails and debase their currencies, because suddenly debt is irrelevant and cash becomes worthless - your fund being based in assets would be repriced at whatever the new currency standard is
Scenario 3) The government fails and the world goes into depression - the markets are pricing this in to an extent already. Your fund would drop further in value, but the value of cash would rise. You would lose compared to cashing in now. 

Even though I would personally expect Scenario 3 to be the most likely, the risk of the other 2 would make me let the fund run. But I have to qualify this advice to say that I have a portfolio of different investments, so perhaps my appetite for risk is higher than average ("Win some, lose some").

dunstonh

 I realise that we dont have a crystal ball but does anyone think that this downward trend will continue ?

There shouldn't be a downward trend.   The markets started falling on 24th February and bottomed out around 18th March.  Since then they have risen.

Would I be better off cashing in the policy and continue to put the monthly premium aside or do you think I should let this policy run its course ?.

What did you do in 2018 when markets fell by 15%?

What did you do when there was a crash in 2015/6?

What did you do in 2008 when markets fell by a higher amount than recent?

What did you do in 2001-3 when markets fell by a higher amount than recent?

Why should you do anything now if you didnt do anything before?

It's a great time to be paying in monthly contributions.  You need periods like this to get higher returns.  If the markets only ever went up, you would get lower returns.

Thrugelmir

pipmoss said:

Hi thanks for that. There is no fee to pay off my repayment plan early so this looks like a good option. Do you think that this type of endowment will recover or do you think it is just 'dead money' each month.

Thanks again

My personal thoughts and opinion. 
Markets could be extremely challenging over the next couple of years. The damage to the global economy is yet to be seen. Recovery is a long term game. 

The pension route at least gives your money a boost with the tax relief it provides. 

Endowments have a number of inbuilt charges. While they serve a usefull purpose. They are not pure investment vehicles. You'll be paying for life cover still for instance. Clearing the mortgage at least saves you some interest. A guaranteed no risk return.