Endowment questions

Skindog72

Hi All, Couple of questions that hopefully somebody will be kind enough to answer
We took out a mortgage endowment plan with Zurich 21 years ago to cover our mortgage of 31k, we have paid the mortgage off but kept the endowment going.
 
1, The last yearly statement shows a cash in value of just short of 23k June 2020 and 27k in June 2021, This seems a rather substantial jump, is this normal in the last 4/5 years of a policy?
2, What are the risks if we keep the policy going till it matures? Is there a chance the cash in value will drop drastically? 

kingstreet

This will be a unit linked plan, probably invested in the Managed Fund which will be 40%/50% invested in equities - UK and overseas. Last year was a very good year overall after a dip in March with Covid. If you are concerned about volatility start switching into safer funds, perhaps 25% a year until maturity.

Old_Lifer

If it is a unit-linked policy it is worth whatever is the value of the units , both now and at maturity. The unit price could rise or fall before then.

If it is  conventional with profits, you will receive  at maturity the sum assured and annual bonuses in full, as they are guaranteed and you may also receive a terminal bonus which is not guaranteed and may change up or down before maturity.  If you surrender the policy you will receive the current surrender value of the various components.    Although the basis of the surrender value may change slightly, generally speaking the surrender value should increase more rapidly as the policy approaches maturity.

If you have a unitised with profits policy,  the value of the units could be reduced if a market value adjustment is applied on surrender   (to protect  remaining policy holders)  but a MVA is not usually applied at maturity.   You may also get a terminal bonus as described above.

I see that   kingstreet   has now indentified  the product.

dunstonh

1, The last yearly statement shows a cash in value of just short of 23k June 2020 and 27k in June 2021, This seems a rather substantial jump, is this normal in the last 4/5 years of a policy?

You may recall that coronavirus kicked in during Feb/March 2020 and markets fell 35%.   UK equity in particular was hit hard.    It then recovery quickly after that.  So, your period doesn't include the falls due to CV but does include the recovery period.  Hence why its higher than normal.

2, What are the risks if we keep the policy going till it matures? Is there a chance the cash in value will drop drastically? 

You haven't told us what it is invested in.   However, generically, the value of your investments can and will fall at times.    The scale of the drop will depend on the level of investment risk being taken.  Equally it can and will go up at times and higher risk generally goes up in more value than lower risk.    Its a zig zag movement with a general upwards slope.  Statistically, the value would be expected to be a fair but higher in most periods.  However, a small number of times it would be lower.