Canada Life endowment

MPD

Is this endowment worth keeping?

25 year endowment maturing Nov 2022
Monthly premium £123.20
Sum assured £34928
Surrender value £13162.89
Death benefit £43179.36
Total bonuses to date £6655.30
Cash value of bonuses to date £3753.59

Projections
4% £54700
6% £67800
8% £85500

Was supposed to cover approx £68000

Current mortgage rate 6.24% but this is a tracker and likely to change in the next couple of years with remortgage, moving house etc.

I have read the literature on the Canada Life website, but I'm sure it is designed to either confuse or say nothing of value.

EdInvestor

MPD wrote: »

Is this endowment worth keeping?
Projections
4% £54700
6% £67800
8% £85500

Looks like it is one of the few worth keeping, they do exist .If you surrendered it and reduced the loan, also increasing the monthly mortgage payment by the endowment premium amount, using an average 6% rate of interest, you would end up with 56,843.

Whereas they are projecting a return of 67,800 @6% which would pretty well pay off the mortgage and give a significant premium for taking the market risk..

I would keep this one, but keep an eye on the projection rates every year - if they start using lower figures than 4,6,8%, that's an indicator something is going wrong.
I would also check the surrender value annually, to monitor what's happening to the terminal bonus.

MPD

Wow! I certainly didn't expect that!

I'll keep checking the forecasts annually when I get my statement.

Thanks for the good news.

MPD

I have just got my latest projection from Canada life. They are saying that based on a review of the investment return on the assets backing With Profit liabilities 5% is realistic.

The projected amounts however have gone up
3% £59800
5% £75500
7% £95400

Can anyone explain how that works?

EdInvestor

Can you call them up and ask for a rundown of the investment of the WP fund? We need to know the percentage invested in equities,property, bonds and cash.

MPD

Canada Life have finally published the 2007 Policy Holders Report.
The breakdown of investments (as of 31st Dec 2007) is as follows

Fixed Interest 43%
Equities 38%
Commercial Property 12%
Cash 5%
Other Assets 2%

Overall investment return 7%
For comparison 2005 was 12.3%, 2006 was 7.3%

Worryingly annual bonuses are down by 0.25% due to the lower surplus arising from surrender claims. On the other hand terminal bonuses are increasing, but of course not guaranteed.

Any comments or opinions on the quality of this endowment welcome.

MPD

Any opinions?

EdInvestor

MPD wrote: »

Overall investment return 7%
For comparison 2005 was 12.3%, 2006 was 7.3%

Thew return is going down, so keep an eye on it.If it drops below your mortgage interest rate it may be time to give it a miss.