Old UF policy from the 60s

mp80

My father sadly passed away recently, and I've been dealing with the estate as the executor.  I came across an old paper policy from December 1965 which he seems to have been paying into forever (United Friendly, now Royal London). 

It's apparently "Ideal life and endowment assurance".  He was paying 2s/8d per week initially for an assured sum of £74 16s 0d -  I saw a recent-ish statement from Royal London that showed he was still paying into it, and received a bonus cheque which he didn't cash for about 40 quid.  is this likely to be worth anything, I thought Endowment policies were basically a scam?  I've written to RL in the interim, but would like any info if anyone has come across this before??

Cheers!

dunstonh

 I thought Endowment policies were basically a scam?

Not at all.  Where did you get that idea?

I've written to RL in the interim, but would like any info if anyone has come across this before??

Lots of people find old penny policies

and received a bonus cheque which he didn't cash for about 40 quid. 

Are you sure its a bonus cheque related to this policy?   Due to taxation, the only time a cheque should be issued that is directly related to the terms of this plan is when it is surrendered (either partial or full).

mp80

The cheque was attached to a letter regarding the policy - it says "in respect of the bonus due" and said he had an option of cashing or allowing the bonus to accrue, he chose to accrue... 

dunstonh

Does it say what type of bonus?   e.g. reattribution of assets or something like that?    HMRC would not allow the final bonus or annual bonus to be paid outside of the policy.

Old_Lifer

You say a  'Life and Endowment'  and that the premium  was initially 2s 8d per week. How much was he paying fairly recently  ?

If this was a whole life policy with the option to convert to an endowment and that option was exercised, the premium would increase though not by that much given the long term.    If the option was not exercised , a lot of these small weekly paid premiums were being converted to monthly by the 1980's so for that reason the premium would change. 

It is quite possible to have an endowment with a long term.   I had a couple myself with terms of over 40 years.

As  dunstonh says,   endowments were not a scam.   Before tax relief  on premiums was abolished in 1984 they were a highly tax -efficient way of saving.   The problem with mis-selling happened when large numbers of people were sold low-cost endowments  (a budget version) as mortgage  repayment vehicles.

If you read the policy document the schedule will tell you when the sum assured is payable.  Any change to the policy since it was taken-out should be evidenced by an endorsement to the policy.

As to the reason for the cheque, the answer may perhaps lie in the history of United Friendly and how it became Royal Life

mp80

It says the "sum assured will be payable on death providing at least 52 weekly premiums have been paid"
I found a newer document, he was paying the princely sum of £7.80 a year
I assume the value will be whatever 74 quid in 1965 is worth now?

mp80

dunstonh said:

Does it say what type of bonus?   e.g. reattribution of assets or something like that?    HMRC would not allow the final bonus or annual bonus to be paid outside of the policy.

Not that I can see. I can also see a few stamps on the original policy stating "Endowment bonus paid" in 1970, 1975 and 1981 with various amounts (£22, £24 and £24)

Old_Lifer

I can see from your last post  what seems to have happened here.

Your father appears to have taken-out a policy in 1965 perhaps to pay for his funeral,  since a basic funeral would have cost under £100 in many areas at that time.

Since there is no maturity date shown in the policy it was a whole life policy.  Two things make this policy unusual:

  1.  It did not pay-out the sum assured in the first year, which is common nowadays with  Over 50's Plans but was not common at that time but would have made the policy cheaper

      

  2.  Bonuses were allotted at the endowment rate.   The main Life Officies would set different rates of bonus for endowments and whole life policies with whole life policies having a slightly higher rate.

   

Your father surrendered some (and probably all) of the attaching annual bonuses in 1970 and has presumably been doing the same thing periodically ever since.  The annual bonuses were only  payable when the policy became payable but could be surrendered at less than face value.  Most  Life Officies would not endorse a policy on surrender of bonus since the policy itself is not being changed but a few smaller ones did endorse the policy.   It may be that  here,  the practice of endorsing the policy was discontinued in the 1980's.    The cheque you have is probably the result of the latest request to surrender bonus  accompanied by a note  effectively telling him he didn't have to go ahead with the bonus surrender.

The amount payable on death would be the sum assured and any bonuses attaching to the policy at that time.

mp80

Thanks for that info!
presumably it won’t just pay out 74 quid (I hope) and would be inflation adjusted based on 1965 values plus the accrued bonuses (if any) plus interest? 

Old_Lifer

The sum assured will be as stated in the policy.   What would boost the payout is annual bonuses payable for over 50 years. and the possibility of a terminal bonus usually expressed as a percentage of the total bonuses attaching to the policy.

Of course, we do not know how much or how little remains of the annual bonuses allotted to the policy over the years.

During my service, we paid interest on claims for the period from the date of death to the date of payment.

mp80

Ok understood !
I doubt it’ll be worth that much then but we shall see. Couple of grand maybe tops assuming he got 30 quid a year for fifty years plus a bit extra maybe