Another "should I surrender?" question

Reaper

I am also wondering about surrendering a mortgage endowment but my circumstances are different to the previous thread.

I have 2 endowments covering my mortgage. However their peformance is rubbish. Give me a list of shares, a blindfold and a pin and I could do better! They are both now with CGNU (parent company Aviva I think) after a series of takeovers. They are 75% invested in unit linked Managed, and 25% in unitised with profits.

Realising disaster lay ahead I decided not to depend on them, took out an offset mortgage and have been saving hard with the aim of paying off the mortgage WITHOUT using the endowments if I can.

I intended keeping the endowments running as savings policies but now I am wondering whether that was such a good idea. After all a chunk of my premium must be going into paying for life cover that would not need if I used some offset money to pay off part of the mortgage (no penalties in doing so). An option would be to surrender one of them and switch my premium to a stocks-and-shares ISA instead. Is the a catch with this plan I'm missing?

One has been running for 15 years and the other for 5 years. A further question is am I right in thinking if I surrender the 15 year one I have no tax liability wheras if I surrender the 5 year one I may have to pay income tax on it?

I'd welcome any advice.

dunstonh

you could consider switching the investment out of the rather dull managed fund and pick a range of funds for the future. NU reckon their property fund will return at least 7% a year for the next 2 years. Gilts/Index linked funds are likely to average around 5% longer term and for equities, you may be better off looking at far east (china has good potential) and uk equity funds.

Obviously risk views should be taken but a managed fund has those areas in it as well. However, instead of being in a fund that tries to be everything but achieves nothing, you can decide how much goes into each area.

alexei_2

Managed Fund achieves nothing!!!!!!!

I would have thought that the vast majority of UK private investors have monies invested in a Managed Fund because of its risk profile. To say that it achieves nothing seems a little strange from someone who works in the industry?

dunstonh

Managed Fund achieves nothing!!!!!!!

I would have thought that the vast majority of UK private investors have monies invested in a Managed Fund because of its risk profile.  To say that it achieves nothing seems a little strange from someone who works in the industry?  

Make sure you understand what i mean by managed fund. I dont mean funds which are managed. I mean the default bog standard "managed fund" which as you say, many seem to end up in.

Managed funds are ideal for tied advisors who are not allowed recommend funds. They can just point the person to the funds that match the risk profile and the client chooses. In reality, that mean the vast majority end up in the managed fund.

If you look at insurance company managed funds the vast majority will mirror each other as much of the management is passive.

I never use basic managed funds in my recommendations. I dislike them as they have no specialists in any one area. There are some better multi-manager mutual funds coming online but I will not use the insurance company ones although some of the specialist investment houses are certainly worth investigating.

I prefer to use asset allocation and risk profiling to select anything upto 10 funds in a range of investment areas. The managment of those funds is usually from someone who actively focuses on the area they are responsible for. Plus you can alter the asset spread over the years to suit. ie, with a plan with a maturity or target date, you can have higher risk funds in the early days and then move to lower risk funds in the later stages.