Should I cash in my endowment?

BellaBargains

Hi,
I'm wondering if someone on here can advise me about whether I should cash in my Standard Life Endowment policy? I took it out in 1992, for £22760, I pay 28.22 per month for it, it matures in 2017 and it is no longer attached to a mortgage. I know that in general you are better off keeping them for the final bonuses but my circumstances are changing as DH is taking a new job on a significantly lower salary (better job security and career structure etc). Currently I only work 12 hours and I didn't really want to go full time until my youngest starts pre school nursery (August 2009) but I could do more hours from September after my eldest starts school. So I was thinking that maybe we could cushion our finances by cashing in this endowment but I don't want to lose masses of money as a result.

Any advice is most welcome.

Thanks

BB

EdInvestor

Only you can decide if you should spend your savings or not. You might get more if you sell it, try for a quote here:

https://www.apmm.org

BellaBargains

I looked into selling it previously but they weren't interested, I think it was because only half of it is with profits.

I suppose I'm trying to quantify how much I might lose - I probably would be "storing the money" in our mortgage and using it if required. Our mortgage is fixed 4.99% until Oct '09.

dunstonh

I looked into selling it previously but they weren't interested, I think it was because only half of it is with profits.

unit linked have a daily value so there is no reason for anyone to pay more. If they want that fund they can go straight to SL and buy the units at face price.

I suppose I'm trying to quantify how much I might lose - I probably would be "storing the money" in our mortgage and using it if required. Our mortgage is fixed 4.99% until Oct '09.

Depends on what you mean by lose. SL have a good range of funds with good potential and a 25 year unit linked endowment would be expected to hit target in general.

Surrendering it may involve a surrender penalty. You are also surrendering at a time when the stockmarkets have fallen around 20% and it generally a good time to be buying not selling. You will also lose the life cover.

As to whether you will get better financial benefit by surrendering it, only time will tell. However, the first thing to find out above all else is the difference between the current value and the surrender value. That is your immediate loss.

BellaBargains

Thanks for that, I looked at the figs today - it's on Red (at 8% (high) they are projecting £16400 on a policy that was supposed to cover a £22760 mortgage. Today it's current value was £6440 and the surrender value was £7240. The total future premiums if I keep it are £3104. Does any of that help?

dunstonh

it's on Red (at 8% (high) they are projecting £16400 on a policy that was supposed to cover a £22760 mortgage.

Doesn't mean a thing for many endowments. Many red endowments have gone onto surplus. Probably more SL endowments than any other provider. The projection method has flaws and needs to be looked at in context with other data. Some projections understate the likely returns. Some leave off terminal bonuses accrued to date whilst on bad examples, some overstate the likely position.

Today it's current value was £6440 and the surrender value was £7240.

Have you go that round the right way? Surrender values are usually lower than current values. Only where terminal bonuses are not included in current values and projections would you expect the current value to be lower.

BellaBargains

This is the information I get when I log in and look up the valuations.

Current Value
Life With Profits Fund 2,974.02
Managed Fund 3,470.68
Current Fund Value 6,444.70

Current Surrender Value 6,444.70
Final Bonus 796.07
Adjustment 0.00
Total Plan Value 7240.77

EdInvestor

Please post all the maturity projections for a view.

BellaBargains

EdInvestor wrote: »

Please post all the maturity projections for a view.

Hi again,

Low 12,200
Med 14,200
High 16,400

Target was 22760

Thanks

EdInvestor

BellaBargains wrote: »

Hi again,

Low 12,200
Med 14,200
High 16,400

Target was 22760

Thanks

If you surrender now and paid off the loan/put the money on deposit at 4.99%, also paying in the premiums to maturity, you would end up with 15,025 more than their medium projection and with no risk.

You would only get a bit more if they make their high projections which is highly unlikely.

So you're not really getting anything extra for taking a risk.Why bother?

Forever_Red

Was there a "mortgage promise"? This could make up a bit of the shortfall. Does anyone know if the "mortgage promise" was guaranteed?

Alan