23 years into 25 year endowment, time to cash in or carry on until the end?

fronty

Hi all,
I'm 23 years into a 25 year endowment, I just had my annual statement, and I think this is the first time they have included the final bonus in my valuation figure. It's been a bit of an eye opener.
The summary is as follows:

Value of units: £28,685.61
Final bonus: £21,741.53
Re-oganisation bonus: £975.65
Cash in value as at 02/07/2020: £51,402.79
This is the amount we would have paid you if had cashed in your policy on this date.

I only have £40K outstanding on the interest only portion of my mortgage, so I can cash-in and have 11.4K to spend clearing other debts.
My annual premium works out at £1402.56, so if were to continue to the end, I would pay in another £2,805.12. My plan has a guaranteed minimum growth rate of 3%, so I'm assuming that whatever impending crash there might be due to coronavirus my plan is going to keep growing regardless (it's in a with-profits fund).
My dilemma is whether to cash it all in now and save myself £2,805 over the next two years, or carry on until the end and get an extra couple years at 3% compounded.
Will the final bonus increase more if I carry on until the end? Would be nice if I could get the cash-in value up to around 60K, if so then it would be worth me carrying on. If less then I have to question whether it's worth continuing, although my plan also includes life cover and critical illness cover, so that would all stop if I cashed in.
Feels like swings and roundabouts. What do you guys think?
Fronty

dimbo61

Do you need the life and critical illness cover ? For the next 2 years.?
3% is a damn good return at the moment.
Do you need the money ?
When does the mortgage finish ?

Old_Lifer

The final bonus is based on the length of time the policy has been a with-profits policy.    A policy which has been in force for 25 years will receive a higher rate of final bonus than a policy which has been in force for 23 years.    However, the final bonus is not guaranteed.   The risk you face is that  final bonus rates  could be cut (or increased) in the next 2 years.    When this happens the differential  will be maintained and  a 25 year policy will continue to receive a higher rate  of final bonus  than a 23 year policy.

You ask ,  will the final bonus increase if you continue paying the premiums ?    The answer would be  yes   but only  provided there is no cut in final bonus rates in the next 2 years.

fronty

Thanks guys, 7 years left on the mortgage, as for whether I need the life cover etc, well that's just it, who knows what could happen. As I'm guaranteed 3% per annum I think I'll keep it going until the end, I don't need the money right now so hopefully it'll grow a bit more.

fronty

Just revisiting this old thread because this policy matures next month and the current valuation is £59,853.58 so there is a good chance it will hit the £60K figure I mentioned in my first post.

jimjames

fronty said:

Value of units: £28,685.61
Final bonus: £21,741.53
Re-oganisation bonus: £975.65
Cash in value as at 02/07/2020: £51,402.79
This is the amount we would have paid you if had cashed in your policy on this date.

My dilemma is whether to cash it all in now and save myself £2,805 over the next two years, or carry on until the end and get an extra couple years at 3% compounded.

Just to point out you won't/haven't saved yourself £2805 in the last 2 years as it's not like expenses you don't get back. You've added to the total funds by that amount plus any growth so it's a good position to be in - you probably wouldn't have saved up nearly £3000 if you'd not been paying it out.

dimbo61

With the very very low interest rates over the last 2 years I doubt you would earn 3% Interest. 
Hopefully you can either pay off the mortgage a few years early or get the payments reduced by paying a big lump sum off the debt.
Thanks for coming back to us.

fronty

So this policy finally matured this month and paid out £60,191.58, now I need to ring up the bank and pay off the interest only portion of my mortgage, quite handy timing with interest rates on the up.