Ditching ex-mortgage endowment - what to do with the money?

thegreatsoprendo

I'm strongly considering bailing out of my endowment that was originally put in place to pay off my very first mortgage of £45k, 23.5 years ago. I now have a repayment mortgage and have done for a few years but kept the endowment in place with a view to using the funds to clear some of the mortgage at maturity. The mortgage has a remaining balance of just over £100k. 

Endowment is due to mature in January 2024 and is now worth £55k so it's done fairly well. However it's currently worth £200-300 less than at the last statement valuation in May and I'm paying in £120/month. Looking at the economic outlook between now and Jan 2024, when it's due to mature, it doesn't feel sensible to keep paying in or to hold the money invested in the Prudential fund. There are no terminal bonuses or anything similar that might make it worthwhile holding the endowment to maturity. 

Plan is to pay what I can off the mortgage now (from memory, I can pay 5% of the balance off without penalty) then use most or all of the remainder to reduce the mortgage when I remortgage in June 2024. 

Question is, what's the best thing to do with the money in the meantime? Looking for something relatively low risk but don't need instant access, so can lock the money in for 12/18 months if necessary. 

[Deleted User]

Hi,

if you surrender you may not get current value of £55k, best to ask for surrender value first.

thegreatsoprendo

Already done, 55k is the surrender value 👍🏼

george4064

If you need a home for approx £120 a month, a Regular Saver could do the trick here: https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/  

You can earn up to 5% p.a., noting that you will be limited to depositing up to a certain amount each month.

Olinda99

Pay January's heating bill ? 🙂

thegreatsoprendo

400ixl said:

When ours matures the final bonus was far greater than the final years payments compared to the surrender value at that time.

Would have lost out on about £4k on a £45k policy if we had done what you are proposing. Does your policy have an enhanced final bonus?

That was the first thing I checked. There's definitely no terminal bonus or anything similar. All I'd be missing out on is any fund growth (or loss) between now and Jan 2024.

[Deleted User]

Hi,

OP says,

"There are no terminal bonuses or anything similar that might make it worthwhile holding the endowment to maturity".

I would've thought there would be.

Albermarle

Looking at the economic outlook between now and Jan 2024, when it's due to mature, it doesn't feel sensible to keep paying in or to hold the money invested in the Prudential fund.

As many other posters are, naturally you are assuming that poor economic outlook = poor returns from investments. However that is not a given by any means,

Nobody knows the future but it is safe to assume that to some extent the very clever people in the City and Wall Street knew a recession was coming and priced it in . Markets have actually bounced back a bit in July. Will it continue , will it go down further? nobody really knows. However it could be just as sensible to just leave where it is until it matures and hope it increases in value.

This thread might be of interest 

Why are the stock markets so stable right now? — MoneySavingExpert Forum

Millyonare

What is the cost, fee, or penalty (in £) to cash it in 5-6 months early?

thegreatsoprendo

Millyonare said:

What is the cost, fee, or penalty (in £) to cash it in 5-6 months early?

There's no fee or penalty and if be cashing in ~16 months early. 

Millyonare

The original post says endowment maturity is in Jan 2023.

If no fee, and no punitive bid-offer spread, if it were me, I'd cash it in and payoff half the mortgage.

Not advice, etc. Just a personal view.