Standard life endowment surrender or keep

carolannjo

We have had this policy since 1994, currently it is split between a managed fund and a life with profits fund. Frankly it is not doing well at all we have changed our mortgage to repayment so no longer need to rely on this to pay out which it won,t anyway.It was supposed to pay off £48k mortgage but currently the surrender value is £9501 which is just about what we have paid in. We have already complained and received a couple of thousand, but can't help thinking we are throwing good money away. Any advice please.

EdInvestor

Hi carolannjo

Standard Life plans to demutualise next year and the With-profits part of your policy should be eligible for a windfall.So I wouldn't cash it in just yet.

You could consider switching the money that is in the managed fund into something that's likely to perform better, such as the property fund.

But leave the other part where it is, otherwise you'll miss out on the windfall shares.

dunstonh

You need to understand how endowments work a little more to know if its likely to be any good or not.

You took it out in 1994, it really wouldnt have much or anything invested for first 18 months- 2 years. Then just as you start building up a value, we get a stockmarket crash which devalues the managed part of your endowment and lowers the returns on the with profits side.

So, looking at it as a snapshot after a stockmarket crash and taking 2 years worth of charges into account, it would look bad. However, you are now buying units much cheaper than before the crash and that is a good thing.

The problem with the endowment compensation method is that it is totally flawed. Projections are often inaccurate and a snapshot of now and assuming straight line growth with doesnt tend to happen with endowments.

You dont say what managed fund you are in but standard life have a fairly decent range of funds available on their endowment. You have paid the charges already so picking a decent spread of the funds could turn this endowment into a pretty good long term savings plan. If its the bog standard "managed" fund, then that is less desirable but switching it is a doddle. Any ifa can print off the form and good IFAs will do it for you for free (by transferring the policy to their agency, they will receive the £1-£3 pm that would have been paid to the original advisor so that should cover the cost without a further charge been necessary. Alternatively, you can ask the switch form yourself and choose your own funds.

The with profits part is quite important at this point. Take a look at recent Standard Life threads and you will see that they are demutualizing in the next 18 months and with profits holders will get a payout of some sort. After demutualization, you can then switch out of the with profits into the other funds.

A stockmarket crash in the early years of a long term savings plan is a good thing to have. It can make the early values look poor but it will be what you pay in directly after that has the biggest growth. Standard Life do have funds quite a lot of funds that have grown in excess of 10% in the last 12 months. Indeed, the bog standard managed fund has grown by 14.1%