standard life endowment, keep or surrender?

treathunter

hi
first time ive done this, hope its ok.
we have just changed our mortgage totally over to repayment. we are now wondering what to do about endowments.
first one started in 1991 matures in 2016, £41.42 a month. in feb 07 current value £10,044. minimum pay out on maturity £15335.
second one started in 1995, matures in 2016, £26.44 month. in feb07 value was £3737.
we are in process of sorting out life cover so the life cover that comes with the endowments would be covered.
im in the process of registering on line with standard life.
any advise appreciated.
we had thought of cashing them in using money to pay off some of mortgage, and using the monthly payments to also py off mortgage. mortgage with nationwide.
thanks again

lopbri

Hi there,
i was in much the same position, standard life since 1989, should have been paying out £50000 in 2014, monthly prem £62.94.
dont forget the so called mortage guarantee, that is supposed to top up the shortfall, i sold mine in june put the money in my offset mortage, and added prem to mortage, when i asked them about the mortage guarantee they said it was only guarnateed if they made returns of about 6 or 7 % per year forget the exact figure, but for the last 16 years the have never managed that so i woulnt count on that, but i would
1/ get it all in writing from them to make a balanced judgment
2/ like youve said make life insurance provision
3/ check with other companies that buy used policies, the best i got was only £300 more than standard lifes, went with them as i had the money inside 10 days, can take 3 months or longer with other companies
hope this helps but dont rush in

lopbri

sorry another option, forget about them paying off your mortage, just use them as a savings plan, as you are already paying out, so wont miss the otgoings.

EdInvestor

Post some more info about the policies

Guaranteed sum assured
Declared bonuses
Surrender value
Maturoity forecasts
Interest rate payable on mortgage

treathunter

hi
thanks for the advise.
mortgage is 5.98% from jan fixed for 5 years.
plus we have a further advance from when we moved here which is at 5.45%, this fixed rate finishes in 2010.

the first endowment was supposed to cover £32000 with life cover for the same amount. the second was for £10000 with life and crit illness cover.

forcasts for the first are at 3.75% get back £17500
5.5% £20000
7.25% £23000

forcasts for the second are
low rate £7780
intermediate rate £8970
high rate £10300

the first endowment has a sum assured of £10498
and a bonus of 0.5% on bonuses already added.
sum assured has a bonus rate of 0.25%
the bonus for the first endowment was £50.19 up to 2/07 and in previous years a total of £4837.89

the second endowment does not have the same set up on the form, it just says final bonus £326.80.
i must say i find it all a bit confusing , im going to wait until i can get on line with standard life then i can look a t the policy on a more up to date footing.
thanks

EdInvestor

You'll have to ring them up to get the surrender value.

treathunter

hi
ive got logged on to the standard life site.
the first endowment has a surrender value of
£11021.75.
the second one they can not tell me at present
thanks

dunstonh

What is the mortgage promise value and the final bonus accrued to date?

old SL endowments require the info to be supplied in paper form and this is important as these are the ones that tend not to include final bonus accrued to date in the projections.

treathunter

hi
the 2nd endowment which was supposed to cover £10000, has no mortgage promise value and its final bonus up to 2/07 is £326.80.
the other endowment has a final bonus of £505.65 up to 2/07, the mort promise on that is £2640 to £3960, this is an estimate from 2/07
we were thinking of cashing in the greater valued endowment paying it off the mort and then paying the payments from that endowmnet off the mort on a monthly basis.
we thought we would keep the second endowment as a savings plan as our eldest will be 18 when it finishes. it also has £10000 of critical illness cover on it.
thanks

EdInvestor

treathunter wrote: »

forcasts for the first are
at 3.75% get back £17500
5.5% £20000
7.25% £23000

If you surrendered the 1st endowment and used the lump sum to pay off the mortgage @ 5.98%, and overpaid with the premiums to maturity your return would be 24,419..

That's well above the best of the forecasts.The mortgage promise IIRC is based on SL getting a return of 6% on the fund,which is possible but unlikely. If they get this, the end result might match or slightly exceed the guaranteed amount from surrender as above, but it's a gamble.

Suggest you see if you can get a bit more for this policy by selling it.

https://www.apmm.org

If you want to gamble (ie see if you can make more by investing the premiums/SV than by paying off the mortgage - the original idea of the endowment) it would be better to use a tax free ISA with lower cost and/or better quality funds than this endowment, which has a large amount of your money invested in low performance bonds, and imposes 20% tax on your gains.

treathunter

hi
thanks for the advise.
we are just waiting to get further life insurance in place before we make a final decision.