Surrender or stick it out

We have an endowment policy (Prudential With-Profits Life Fund 2 (ex SA)) that matures in June 2025 which costs £113.50 per month, its current value is a little over £45k. Our mortgage is currently £208.72 @ 5.42% per month, a lifetime tracker (BEBR + 0.17%) current balance is £46.3k.

The estimated maturity value of our policy is £47155.75 @ 1.49%, £49346.25 @ 4.49%, and £51572.59 @ 7.49%. I am wondering if we should surrender our policy and clear our mortgage as soon as policy value equals mortgage balance? I estimate that would be a year early.

Comments

  • Any one have an opinion on this?
  • amnblog
    amnblog Posts: 12,387
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    On this type of policy you get annual bonuses on the way which increase the final value but you should also get a final terminal bonus which is bonus held back for final payment.

    Check with Prudential, but don't shoot yourself in the foot.

     
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • PeteLynn
    PeteLynn Posts: 5
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    edited 28 November 2023 at 7:05PM
    TY

    Taking the current value of our endowment at £45k and adding a years worth of mortgages payments of £2600, and a years worth of endowment payments of £1365 totals @ around £49k.

    I was thinking we would be lucky to get £49k at maturity nevermind more than that.
  • Hoenir
    Hoenir Posts: 1,236
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    With Profits suggests that some form of terminal bonus will be paid. Such policies normally benefit from smoothed returns with a lump credited upon maturity. Until clarified take no action. 
  • ha have you thought about cashing in the endowment and putting into higher interest. If there’s two of you bang 20k into a higher interest rate isa and split the rest into a savings account. First direct are doing 7% up to £3400 so there’s your answer.
    My Username is tongue in cheek. Not meant to offend I promise….
  • TY loads to think about cheers
  • dunstonh
    dunstonh Posts: 115,695
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    We have an endowment policy (Prudential With-Profits Life Fund 2 (ex SA)) that matures in June 2025 which costs £113.50 per month, its current value is a little over £45k.
    Is that the current value or the surrender value?   
    Often there is a difference between the two as the current value will not include final bonus accrued to date whereas the surrender value will include minus any early surrender penalty minus any market value reduction (if applicable).

    ha have you thought about cashing in the endowment and putting into higher interest. If there’s two of you bang 20k into a higher interest rate isa and split the rest into a savings account. First direct are doing 7% up to £3400 so there’s your answer.
    On the other hand, 2022 to early 2023 was a horrible period for low risk investments (not stockmarket as that has been ok).  However, that has just turned the corner there has been over 5% gains in a month on many fixed interest securities (that the endowment will be utilising).   We should, baring any other unknown negative event, start to see further improvement now that interest rates have peaked.  Especially when the signs are the rates are going to fall and some easing of fiscal policy across the world.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • That is surrender value there is no MVR.

    I was also thinking I did not want to wait 1 year just to break even when the endowment will cover the mortgage with 1 year to spare.
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