My Little C.I.S. Endowment...

Dick_here

Hi all

Any thoughts welcomed once again...

24 year with profits endowment taken out with CIS (Co-op) in Feb 1990, now no longer needed for the mortgage it was meant for.

Cost - £48.54 per year.

Sum assured £1024
Guaranteed death benefit and 'target amount' £2300
Most recent projections (Sep 2006):
@4% - shortfall of £410
@5.75% - s/f of £160
@7.5% - profit of £120
Their view is that 5.75% is a 'reasonable assumption' - I got an 'amber alert' letter then.

Current surrender value (Jan 08) is £1509.80
Current maturity value £2867.42

So I've got 6 years to go at £48py, to get back an extra £1300, hopefully. Worth keeping ?

Thanks guys!

EdInvestor

Hello !!!!!!,

If you want to understand endowments better, it's helpful to know how realistic the projections are.To judge that, you need to know how the company's With-profits fund is invested - what percentages in equities,bonds,property,cash.

A "zombie" endowment will be in a WP fund which is almost entirely invested in bonds and thus can't be expected to perform at more than 4% a year if you're lucky.These policies don't have a hope of paying off mortgages.

A quality endowment (of which there are few) will have a percentage of around 70% or more in equities and property, with 30% in bonds and cash.

Most are somewhere in the middle, and each WP fund is different.Suggest you call up CIS and ask for their figures.We'll then be in a much better position to decide whether you will do better in cash.

Dick_here

What are the chances of someone knowing that info though, Ed ?

Aside from that, I thought it was doing ok judging by the figures alone. Does that not seem the case to you ?

Anybody know what CIS are like generally, are they decent performers or not ?

EdInvestor

!!!!!!_here wrote: »

What are the chances of someone knowing that info though, Ed ?

It's not a secret. They may have to call you back as most customers haven;t the foggiest about this kind of thing , but they will know. It may well be included in your annual bonus statement.

Dick_here

Anybody got any views as to whether I should take what's on offer now, or keep it going ? CIS announce bonuses on 1 April, ironically, so if I find then that the current maturity has reduced, will the surrender value also have reduced, or is the gap between the two simply narrowing if that happens ?

undercoat11

Hi

You are not paying an awful lot into it at the moment - less than £50 a year is less than a fiver a month. Why not carry it on for the full 24 years? We did this with our Prudential with profits endowment and despite wondering what we would get at the end, we actually did very well - a return of over 300% on the sum assured.

If you have to pay in 48 x 6 = 288 for a return of 1300 is not bad.

All the best

Dick_here

Thanks, uc, and I agree.

I'm still unclear as to whether surrender values reduce if maturity values do. Anyone know ?

Dick_here

I've got the info Ed.

According to a leaflet I received, it's:
45% Fixed-interest securities
30% UK equities
9% Overseas equities
16% Property

How does that sound ?

Dick_here

dunston, Ed, anybody else ?

EdInvestor

!!!!!!_here wrote: »

I've got the info Ed.

According to a leaflet I received, it's:
45% Fixed-interest securities
30% UK equities
9% Overseas equities
16% Property

How does that sound ?

That's a very respectable investment mix for a WP fund these days, so their projection of 5.75% does look reasonable.

But it still won't beat putting it in the bank.

If you cash it in and put it in an account earning 5% net of tax, also paying in the premiums to maturity, then you would end up with 2,359, compared with their forecast of 2,140.

And of course the bank account is risk free.

Even the better quality WP endowments just can't compete these days.

Financial_Novice_2

Hi !!!!!!
I'm afraid I don't know much about life policies however I did have a With Profit Endowment with Scottish Mutual that matured 3 years ago. In all the annual statements and maturity projections it showed the bonuses earned to date. However when it did actually mature it had earned an additional £6k of Terminal Bonus which is never quoted in projections because it is not guaranteed

Is this something that might apply to your endowment or is it a different kind of policy. If it does apply may be something else for you to consider when making your decision.