Help understanding endowment statement!

shazbats

Hi I’m a bit confused, it’s probably really simple but I’m confused. My endowment is due to end in 18 months my most recent statement say that my fund value is £42,578.20 made up of £35,512.99 in investment plus bonus of £7,065.21 . But it says my cash in value on 1st Nov 2020 is nearly £75,000.  Can someone explain to me how the cash in value is so much higher than the fund value? My mortgage I was hoping to pay off is for £80,000 Thanks for any help. Also would I have to pay tax if I cashed it on early? Thank you S

dunstonh

 But it says my cash in value on 1st Nov 2020 is nearly £75,000.

It is very unusual for a provider to offer a forwarded dated surrender value.     Can you clarify the date and what it indicates (i.e. current value, surrender value etc).

Can someone explain to me how the cash in value is so much higher than the fund value? 

A With Profits policy is made up up multiple things.   The guaranteed sum assured (think of it as guaranteed minimum payment).  There are unitised with profit funds that are a variation of this. 

 You have the annual bonus (used to be called the reversionary bonus). This is added as you go along and is guaranteed and cannot be taken away.    And then you have the final bonus (used to be called the terminal bonus).     There are other obscure bonuses that can be added (estate distribution for example).

The final/terminal bonus accrues as you go along but you dont see it (it is possible for advisers to see it and some online systems will show what has accrued to date).  It is not included in the current value as it can fluctuate and its not technically yours until the policy ends (through maturity or surrender or death).

So, what you normally see is the current value being lower as it doesnt include the final bonus and the surrender value being higher as it does include the final bonus.

Also would I have to pay tax if I cashed it on early? 

If it is a qualifying policy (most are) and you have done at least 10 years (which you would have) then there is no tax to pay.

Do note that some endowment providers have a mortgage endowment promise value that they add on maturity but not on surrender.   Also, some plans have a surrender penalty/cost.

shazbats

Thank you, it confused me because bonus was mentioned  but no way near that amount. The date mentioned is correct and in the future, but they have literally just replied to my query and have now said to ignore that and they will send me a new statement. Thanks again for your help. S