Endowment

oceanblue_3

Hello Garybark

Edinvestor is not a qualified adviser, and she tends to post before she thinks!! For example, this Friends Provident policy of yours may provide you with valuable death and/or critical illness benefits, yet Edinvestor has not even bothered to check with you!!

Edinvestor says this..."If you did so and put the S/V of 6k in the bank @4% until maturity, also paying in your premiums, you would get just over 45k at maturity. Since this is considerably more than the insurer's estimate of 37.6k at the same percentage growth figure for a risk-based product, I would surrender this one .

The only reason for keeping it might be if you needed the life cover and it would cost you a lot to replace it - perhaps because you had developed serious health problems since you took out the endowment.

Otherwise if you want to take risks with your money, they are cheaper ways to do it which ought to deliver a better return."

If I were you I would find out if Friends Provident are currently paying a Terminal Bonus on policies maturing after 25 years. Give them a call to find out. If they are, then bear in mind that the projections they have given you do not take into account any terminal bonus; therefore, the figures they have given you are probably erring on the side of caution.

Next, find out how much it would cost to insure yourself so that the mortgage is paid off in the event of your death/critical illness.

Next, ask Friends Provident if you can stop premiums, but make the policy paid-up with a "reduced sum assured". This, if allowed, would protect your investment to date.

Next, depending upon the answer from Friends Provident, I would seriously consider converting your mortgage to a "repayment" mortgage (if you haven't already done this) and adding the £115.00 per month to your capital repayments so that you are constantly reducing the amount outstanding. If you want to take some risk, then consider putting this £115.00 per month into a stocks and shares ISA to help build up a cash sum.

Don't listen to posters who, as a matter of course, criticise IFA's - try to find one you feel you can work with; be patient.....I'm sure you will be better off.

Good luck - come back if you have any more questions.

EdInvestor

garybark wrote:

i have an endowment should make £60000 not using it for mortgage anymore,still have 17 years to pay.should i keep it or sell?

Just drawing Oceanblue's attention to the original post. :rolleyes:

oceanblue_3

And your point is..........?

dunstonh

There are lots of ifs and unknowns outstanding. So no-one give an accurate picture of what should be done.

We do not know what fund(s) are invested in. You give a example of 4% growth. However, there may be funds available where there is decent growth potential that could exceed that.

The OP could be a higher rate tax payer and the as the charges would have been paid already, if a decent fund range is available, funds from that could be chosen and turn it into a tax efficient savings plan.

Life cover is on the plan and this may still be worth something. If CI is included, then the terms of cover will be far better than policies that have been available over the last few years.

Paid up may be the cheaper option. You get growth on the value achieved and do not pay any surrender penalty on maturity. This could be linked with a fund switch if available or desirable.

Froggitt

dunstonh wrote:

We do not know what fund(s) are invested in. You give a example of 4% growth. However, there may be funds available where there is decent growth potential that could exceed that.

There are.....however the higher the growth potential, the higher the risk.

dunstonh

Froggitt wrote:

There are.....however the higher the growth potential, the higher the risk.

Potentially correct. However, we dont know the risk profile of the OP. There could be a range of low risk funds available, such as index linked, property or fixed interest. These would offer greater potential than 4% on the building society.

Past performance being no guide for the future but those three funds with FP have managed 10.7, 7.7 and 8.7%, respectively, a year average over the last 10 years. They have low volatility and should be considered as a possible option, if they are available.

EdInvestor

It appears to me from what little we know about this policy that it features high charges - or very expensive life cover - or both.

Thus I'd have thought that gary could probably find a better home for his money elsewhere since he doesn't need it for his mortgage any more.

We don't know if he understood that an endowment involves risk in the first place, so much of this argument is quite possible irrelevant as we don't know whether he might look for a savings home or an investment home for the money.

With endowments I always assume savings, because a) it's clear most people thought that's what they were originally buying and b)because if you start talking about investment funds on MSE the advice police will descend (any minute now I'd have thought) and we don't want that, do we? .

dunstonh

It appears to me from what little we know about this policy that it features high charges - or very expensive life cover - or both.

We can't tell any such thing. If there is life, CI and waiver cover, then that would eat more of the premium than just life cover. The charges would have been mostly, if not all front loaded so early day surrender values would be low.

The important thing is to check what ongoing charges there are. If the charges have all been paid and there is no bid/offer spread (there may even be increased allocation now), looking from this point on, you could be looking at a cheap savings plan with protection included.

With endowments I always assume savings, because a) it's clear most people thought that's what they were originally buying and b)because if you start talking about investment funds on MSE the advice police will descend (any minute now I'd have thought) and we don't want that, do we? .

Recommending surrender is giving advice on a regulated financial services product and puts you in breach of FSA rules. Pointing out that investing into alternative funds may be option does not.

I quote your comments below:

If you did so and put the S/V of 6k in the bank @4% until maturity, also paying in your premiums, you would get just over 45k at maturity. Since this is considerably more than the insurer's estimate of 37.6k at the same percentage growth figure for a risk-based product, I would surrender this one .

That is a serious breach and one that I am sure the FSA would be concerned over. Indeed, I am reporting it to the mods to look at. You have made a recommendation without being licenced to do so on a regulated product. You are not qualified to do so. You have not investigated all the options available and have insufficient information to may any such recommendation.

Ed, you could be right in saying that surrender is the right option. However, you could also be so very wrong and cause the OP to lose a lot of money potentially if they were to follow your advice. The policy needs to be looked at and questions asked of FP to ascertain the full information to decide on whether keeping it, making it paid up, surrendering it, switching funds or whatever are appropriate actions.

EdInvestor

I'll simply draw your attention to the statement which applies to all posts on this board and can be read at the bottom of every page :.

This website is based on journalistic research. It does not constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.

oceanblue_3

Edinvestor says this..."I'll simply draw your attention to the statement which applies to all posts on this board and can be read at the bottom of every page :

Quote:
This website is based on journalistic research. It does not constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research."

Nevertheless, on a simple human level, we all owe a duty of care to everyone who asks for advice. For you to say to somebody you have never met "I would surrender this one" is bold, to say the least. For you then to seek the protection afforded by this website betrays a callous disregard for the genuine welfare of this poster.