Life assurance - sell, surrender or sit out

scorpionix

Hello all

I've looked through various threads similar to this but my circumstances seem fairly unusual so rather than hijack somebody elses thread I've decided to start my own.

I have a Phoenix Homestyle life assurance policy originally taken out to cover a mortgage that I no longer have.

Policy details -
Guaranteed Death Benefit £35k
Monthly payment £65.38
Commenced Sept. 98
Finish Sept. 23
Current Surrender Value (@2/4/08) £6343.00
Projected Returns @4% £22.1k @8% £36.1k
Any other pertinent details can be provided if necessary.

My Circumstances
No mortgage, no property (no chance either atm), no dependants, no debts.
1x MC ISA (07/08) @£3k, £6k in decent savings a/c (inc. £3.6k earmarked for ISA 08/09), low income (<£14k), v low outgoings ( I live & work in a pub :beer: )

I know these policies are performing poorly and think I'd prefer increased liquidity while I work out where my life is heading next. However I'd like peoples opinions and advice on this as although mathematically competent I'm not even sure what factors to base my decision on.

Thank you all in advance

dunstonh

I know these policies are performing poorly

How come yours isnt then? 8% gives you a surplus which suggests it is there are thereabouts to being on track (7.5% p.a. target growth rate would be the region that many of these were set up with).

How is it invested at the moment? You mention no funds and that is the most important bit.

scorpionix

thanks for looking.

The money is 100% invested in their Managed Fund. The statement I got does go on to say these are the rates they are allowed to project, and go on to suggest rates may be at the lower end.

dunstonh

The statement I got does go on to say these are the rates they are allowed to project, and go on to suggest rates may be at the lower end.

Even if it had historically returned 15% a year every year they would still use those rates and closed companies usually tell people to look at the lower end. Its almost standard nowadays to under project nowadays.

The managed fund certainly has potential to exceed 8% p.a. and would almost certainly would have done in 4 of the last 5 years. Who was the original insurance company before they closed and sold up to Pheonix?

scorpionix

The policy was originally with Royal & Sun Alliance.

I get the impression from what you've said that this is still a decent way to save. Am I correct ?

dunstonh

I get the impression from what you've said that this is still a decent way to save. Am I correct ?

By modern standards endowments are an awful way to put money aside each month. However, the bulk of the charges are front loaded at the start so once you have paid them, which you have, you then have to look at this point forward and decide.

Your fund has performed on a yearly basis (to last quarter end)
2007 -2.09%
2006 6.18%
2005 23.12%
2004 11.41%
2003 23.43%

That is the individual year returns and not cumulative. So, looking at you 4, 7 & 8% figures, it only failed to miss the mid rate once in that period but two of the periods it shot through the mark.

For a jack of all trades, closed life company fund it isnt actually too bad.

You quoted the surrender value. Is that the same as the current value or does it include a penalty? If no penalty, then moving to a stocks and shares ISA may be more tax effficient and cheaper. If there is a penalty, you may have to wait until it goes or is low enough to accept. However, until then, this endowment is not a bad one based on what you have posted so far.