Endowment -- Soldier On or Chop In

pararct

All views and opinions gratefully received.

Winterthur
Unit Linked Mixed Fund (Value of 1 unit in Fund on 22/11 £29.614)

Current Value £11,516.88 Surrender Value £11,176.81 Target £40,276 Matures 11/2018

Cost of life cover? Male aged 50 next birthday non smoker Female 46 same.

Shortfall Projections:
4% £14,776 6% £9,576 8% £3376 Monthly Premium £61.65
Wintherthur say that 6% is a reasonable growth forecast.

This plan was originally taken out to cover a mortgage. That mortgage was settled last year and we simply kept the plan on as a savings vehicle.

Would we be better served chopping it in and putting the money somewhere else such as an ISA?

dunstonh

The fund has been performing in excess of 10% p.a. for the last 5 years (which would put you in surplus) but long term average is probably fair at 6-8%. (note companies always put the middle figure as being reasonable even if the fund has higher or lower potential)

It tends to follow sector average more often than not. Its not the only fund that is available to you and they do have better options which you can switch into. Some of which could offer a lot better potential whilst depending on your risk profile.

You are paying for life cover on this plan. Do you still need it for any other purpose? If not than a stocks and shares ISA will almost certainly offer better value for money that would have no cost of life cover and would be tax free. You would lose £340 by surrendering but that is only 3% and you should get that back within 12 months of investing in a stocks and shares ISA purely on the removal of life cover and tax. Plus, stocks and shares ISAs have a greater fund selection available to you.

If you are talking cash ISA, then you need to be aware that although the endowment isnt as efficient as the stocks and shares ISA, it would probably return more than a cash ISA in the long run. It certainly has done historically.