Success Stories - Pensions

Somebody

On reading forragingfowl200's experience of his mortgage/endowment, I have a story to tell.

We took out an interest only mortgage with an endowment in 1992 (MIRAS was still a thing back then), paying £88 a month for the endowment. Long story short: I learned a bit more on personal finance/financial services and got £6.6k compensation on a mis-selling claim for the endowment. We subsequently switched to a repayment mortgage (paid off since) but kept the endowment going. The endowment matured in 2017 but we we've not yet cash it in. We paid in £26.4k (£20k nett when compensation taken into account); it's now worth £75k+, still growing and still providing a level of joint life assurance. Thought about putting it in trust but will not bother now as will cash in soon to pay for a few business class tickets.

Roger175

https://forums.moneysavingexpert.com/discussion/comment/81964877#Comment_81964877

Interesting post.

Out of interest, what value Mortgage was the endowment backing and would it have covered the IO mortgage in 2017?

We bought our first house in 1985 and had to fight tooth and nail to avoid an endowment mortgage, we kept getting told how great they were, but weren't prepared to take the risk. However, given that everyone was raving about them, we actually took one out as a saving vehicle (to hedge or bets!). It performed dismally in the early years and when we reached a break-clause point after 10 years, we jumped ship and cashed it out. I can't recall the numbers now but I think we just about covered the payments, nothing else.

Somebody

It was backing a mortgage of £68k. We moved in 1996 and that's around the time when I put in a claim for mis-selling, and got an offset mortgage. Endowmant was worth £47.7k when it matured in 2017.

Roger175

Which reinforces the point that endowments were pretty poor investment vehicles. If you had still had the original mortgage, you would have been looking at a £20k shortfall. Remember, these things were sold as the wonder product that would not only cover your mortgage but would leave you with a big lump sum.

Pleased it worked out for you and that you were able to switch and clear the mortgage etc.

tr7phil

We had an endowment mortgage in 1993 for £77 per month covering a £52,500 sum. When all the terror happened over endowments we switched to an interest only tracker mortgage at 0.19% above base rate paying the interest plus £200 per month. The interest rate then proceeded to plummet and I left the payments the same. When the mortgage became payable and the endowment matured in 2018 it paid out just over £48,000 and the sum owing on the mortgage was £21,000 so we did quite well. I know it wasn't the best investment but the thing is, if I hadn't had that endowment at that time it wouldn't even have occurred to me to do any investing at all apart from me pension so overall I am glad that we took out that endowment mortgage.

I actually still have an endowment like policy for £25 per month over 10 year with the Sheffield Mutual Friendly Society which I took out when my endowment finished, at that level it's a tax free investment and it looks like it's going to return more or less double the £3,000 I will have invested with them when it matures. I probably won't take out another though…

katejo

https://forums.moneysavingexpert.com/discussion/comment/81965002#Comment_81965002

In 1993 I walked out on 1 mortgage advisor because she insisted I had to go for an endowment! I wanted a repayment and I got it.

Roger175

We nearly did the same. It was back in the day (1985) when you had to put on your best suit and go and meet the manager of your local Building Society. Having persuaded the manager at our local Abbey National to agree to give us a mortgage, which involved having to prove I had a 2nd job, working weekends for a builder, as well as having to show him my rent book to prove I could meet my half and then my fiancée had to prove she had a pattern of doing overtime, we finally came to the subject of the Endowment. We eventually agreed on a repayment mortgage and they said they would post the forms. When they arrived they were for an Endowment mortgage and so we had another argument before eventually getting the right forms. The problem back then was the Building Society got a large commission from the endowment company, so they pushed them like mad.

Almost_Retired_2026

Not sure if this is on topic but I was super fortunate recently. I’m approaching retirement, probably August / September this year. It was my intention to transfer two substantial pots from Scottish Widows over to a SIPP within the AJ Bell platform. I didn’t want to transfer it inspecie, I was happy to move it all over as cash. I made the necessary applications and waited for the transfer. It all got settled about four days prior to Mr Trump starting his conflict with Iran.
My money was in cash !!

Couldn’t believe it.

I’ve since moved it to funds and made a few bob along the way. I really am not that fortunate in general, so very happy it went well.

sausage_time

https://forums.moneysavingexpert.com/discussion/comment/81990314#Comment_81990314

Gosh - that was fortunate! Could so easily have gone the other way.

YellowCarBlueCar

Quite a long story with ups & downs, but with my last working day less than 2 months away at 56, I think it’s a success story.

I graduated mid-recession and was unemployed for a year. My first job (age 22) was in the public sector where I worked for about 5 years, so I didn’t really have to think too much about pensions. I was lucky that I received a promotion about 6 months before I left, and as it was a final salary scheme (back in late 1990’s) that must have given the value a bit of a boost. Outsourcing meant that a public sector career wasn't an option, so I had to move on.

The next couple of jobs were for City banks (on the IT side). I had a meeting with the pension scheme reps in the first week and they asked when I planned to retire. At that time there were quite a few of my parents’ peers retiring around 55 – so thought I’d like the same. The bank made a flat 6% contribution for people of my age, and I added another 11.5% with an additional contribution for contracting out.
After just a couple of years my bank was bought and closed, so I left with about 9 months’ salary as redundancy pay (golden handcuffs to stay to the end). Quite a chunk off the mortgage.

I’ve since been with my current employer for more than 25 years. I’ve always paid to get the maximum matching contribution, but with poor job security my main focus was initially on paying off the mortgage (interest only starting in 1995) – which we achieved with an offset mortgage by about 2006.
Around that time, still in the shadow of the dot com bubble bursting and before pension freedoms, I recall looking at a pension forecast which said that if I continued to pay in at my current rates (15% including employer matching) and worked until I was 65, then I could get an annuity providing an income of about 1/3 of what I was earning.
I didn’t really understand much about investing then, and even less about pensions, but that projection was enough to convince me that ‘pensions were rubbish’ and so made plans to run a holiday let alongside the day job. So we soon had another mortgage and worked to pay that down.

It was only in the late 2010’s, and largely thanks this forum board that I cottoned on to the tax benefits of pension contributions, realising that as a 40% tax payer markets would have to perform pretty badly to make that a bad investment. Guess I still a few jitters after the dot com correction and previous poor projections.

Our endowment policy from the first house purchase matured in April 2020 just as the markets crashed for the pandemic, so really not great timing, but it left us with another chunk of money.
But being mortgage-free again and really busy at work through the pandemic (now classed as a ‘key worker’) I decided to pump what I could into my workplace pension while the markets were low. Things would either come good and markets recover, or we’d have bigger concerns than investment performance. I really don’t mean to sound insensitive to those who lost more than money in the pandemic, so please forgive me if it sounds that way.

During the pandemic, while working from home was the norm, I also managed to get myself officially home-based.
This in turn allowed a move to a much cheaper (and infinitely nicer) part of the country a couple of years back. Again luck paid a big part here with the South East property price growth.

Adding proceeds of the house sale to pensions (as much as allowanced permitted), and 16 years of decent contributions has meant that I’ve got to the stage where my DB pension from my first job + state pension will meet the cost of bare essentials after age 67, and the DC pot will bridge the gap and still mean that we have more disposable income now than in our working years.

So what I’ve learned (nothing profound):
-Pay in what you can afford early and let compounding do the work.
-There will be times when markets are down and nerves are tested.
-A DB pension, even a small one is a godsend to guarantee basic needs.
-To an extent it doesn’t matter where you invest. Paying off the mortgage, investing in property, pension, ISA. Some options are better than others, but none are bad.
-Luck, both good and bad, will probably play a big part in the outcome.
-The journey continues. Retirement is a big milestone, but decumulation is the next phase.