Help! Advice appreciated!

Gairloch

Hi everyone,

Perhaps someone here can give me a little advice?

In may 1993, I started a 25 year Legal and General flexible mortgage plan, for a sum assured of £35000, starting payments at £38.10 per month, which rose over the first 5 years, to around £76.20 per month, which they stayed at since. The plan was/is due to mature 1st May 2018, just over 10 years away.

I received a green letter recently indicating that the plan was on track to the £35000, assuming 6% growth per year it would show a £300 surplus or at 8% a £6,600 surplus, so either £35,300 or £41,600 in ten years time, based on these illustrations.

A bit concerned, that these figures didn’t look like to ones that were shown to me when I was advised to take out the plan (i.e. the growth figures and surpluses were significantly less than those I was assured was likely), I wrote to complain to L and G.

I received a reply, which said on certain points my complaint was upheld. Basically they say, that based on the information provided, that I shouldn’t have been sold this plan, as it wasn’t suitable for me at the time (not actually having a mortgage, and attitude to risk not fully determinable). They have offered a refund of all premiums paid to date (£12,268.20), plus interest (£5,317.67), a total figure of £17,585.87. They also included for comparison a surrender (cash-in) value of £14,177.88 on the policy.

I currently have a repayment mortgage with about £90000 outstanding and just under 22 years to go, at a current fixed rate of 5.69% (this lasts for one more year at this rate).

My question is, should I forget all about my complaint and let the policy run the full term, in the hope that over the next ten years, the value increases. Or should I take the money, use it as a lump sum to pay of part of the mortgage, and then use the £76.20 per month (which I am currently paying in premiums to L and G), to overpay the mortgage? I would also intend to use any money saved in monthly mortgage payments, due to the lump sum payment, to over pay. What I mean to say is that I would want to keep my mortgage payment as it is, but plus the £76.20.

So I appreciate any advice, I know it’s impossible to predict the future, but maybe someone here has a better feeling for it than me? If I keep the policy running, will it be better for me in ten years time, than cashing in now and throwing the lump sum into the mortgage, then overpaying by what I’ve saved in monthly outgoings?

Thanks in advance to anyone who takes the time to read this post (I appreciate that it’s along one), and reply.

dimbo61

I would take the money that L & G are offering and pay it off the mortgage
if you can or invest it in ISA,s till the fixed rate ends. Or a bit of both if only
10% max overpayment in one year.
You will be looking for a new deal next year and the rate may well be over
6% plus the L & G plan is assuming 6% and 8% growth and who can say that
will happen.
So take the money and pay off a lump sum off your mortgage then overpay by the £76.20 plus saved interest on the lower mortgage sum you will have
GOOD LUCK

Gairloch

Thanks dimbo, I appreciate your advice. I does confirm what I was thinking myself, ie, that if I left the policy to maturity, odds are that it would be around £35000, but I would have paid another 10 years premiums towards that. In real terms I would only be something like £8-90000 better off than what the L&G offer is today, and I reckon, like you, that with the lump sum and extra payments going toward the mortgage, I will easily save more than that in interest. Thanks again for your solid advice.

silvercar

In may 1993, I started a 25 year Legal and General flexible mortgage plan, for a sum assured of £35000, starting payments at £38.10 per month, which rose over the first 5 years, to around £76.20 per month, which they stayed at since.

Interesting that someone else has a similar plan.

I took mine out in July 1986, sum assured was £42,800 starting payments at 35.15 per month rising to 70.30 after 5 years.

I keep getting green letters. When I put in a complaint they accepted the complaint but calculated that I wasn't due any compensation.

Whats also interesting is that the investment levels required to deliver the target amount were so much lower when I took my plan.

Gairloch

I don't know exactly how they arrived at the figure they offered me either. Return of all premiums plus interest is what they said, but I dont know what kind of rate of interest they have used, presumably it mirrors what I would have, if I just had made regular payments to a building society or something?

Gairloch

Duplicate post, sorry!

Gairloch

Hi again Folks,

Just when I thought that I had things figured out in my head, I stupidly/wisely (uncertain just now!) thought I'd have another look over my endowment policy, which to be exact is a unit linked L&G endowment policy, in their Accumulated Managed fund.

Here is some information from previous statement, not the policy updates where they give you the 4%, 6% and 8% projections, but from a separate annual statement.

Year : Fund Value : Units held : Unit price
2003 £5419 488 £11.09
2004 £7769 643 £12.07
2005 £9544 708 £13.48
2006 £11620 763 £15.22
2007 £14328 813 £17.60

After checking, the current unit price for the fund currently seems to be £16.40, so a little drop since the 2007 statement, and I guess the price which they have used to calculate the above mentioned (in my 1st post) surrender figure of £14177.88.

Even so, these figures generally seem to show growth well in excess of the 4%, 6% and 8% projections which prompted me to contact L&G in the first place. I know previous performance is not necessarily a guide to future performance, but I now can’t help thinking that the projections somewhat undervalue the policy, and that I may have been a bit hasty. Is it commonplace for companies to do this? What I mean is, for the last few years L&G have said that 6% is a realistic growth rate, but it seems to be actually more than this. So maybe when I look at the projections, I am more concerned than I should be?

Sorry, I feel I may be rambling a bit. However, if anyone catches the drift of what I’m trying to say, please post any comments, as before, any advice, is very, very welcome. I just dont want to make a rash decision and throw away this policy if its actually doing a lot better than I thought!

dimbo61

there are on this site a few experts on endowment policies and I dont know
what the future performance of your policy might be ( does anyone ??)
but if you took the money on offer from L&G and paid that off your mortgage
today and then paid the interest saved £X plus the £76.20 off your mortgage
each month .
you have the figures which you pay each month and there are a number of calculaters to work out how much you will save by paying off the lump sum
and the new monthly overpayment . YOUR DECISION GOOD LUCK