Endowment Advice - L&G Funds any good?

sliver

Hi,

I was hoping to get some advice on my endowment. I have 2 policies with Legal and General that both had an Amber Alert of shortfall. I am making separate arrangements to overpay my mtge so that any shortfall is allowed for by capital reduction.

In the past I had a bit of a blind spot for the mtge and its supporting repayment vehicle and have never really looked at changing them (or even reviewing them for that matter). Since finding MSE that's changed!

I had intended to retain the policies, but wanted to check whether the funds they were in were any good, and if not should I think about (or even am I allowed to) change the funds in which they are invested and would this be a good idea?

I have one policy with 2 contracts which has units held in Mortgage Pep with funds in UK Index (R) and Worldwide Trust (E) and also a Mortgage ISA with the same funds.
My second policy is a Mortgage ISA UK Index (R) only.

Are these funds any good? Is there a good place to check (other than you very helpful peeps)? I was planning on keeping the policies as a long term investment and life cover mechanism. When I began typing I wasn't really asking if I should cash them or not, but as I continue to type I realise that could be the outcome of my question!

Any advice would be gratefully received

S

dunstonh

I have one policy with 2 contracts which has units held in Mortgage Pep with funds in UK Index (R) and Worldwide Trust (E) and also a Mortgage ISA with the same funds.
My second policy is a Mortgage ISA UK Index (R) only.

You dont have an endowment thankfully. You have a better option although I personally dont like the funds.

You would expect them to appear in an amber position mainly due to the way projections work rather than them actually being likely to fall short although there is always the risk of that happening.

Any advice would be gratefully received

It's against board rules to give advice on investments (As well as breaching FSA rules) but your choices are:
1 - get rid of and switch to repayment
2 - keep it as it is
3 - utilise a wider spread of investment funds and give yourself more potential for the same or even lower risk.

Personally, I would go with the latter.

turbobob

Just to clarify are these policies that provide life cover, and possibly critical illness cover and other addons (endowment policies but invested in PEP/ISA funds) or are they straight ISA's which you pay into?

sliver

Thanks

Turbobob, they are endowments (well I thought they were but dunstonh may have another term - L&G call it a flexible mortgage plan) invested into Pep/ISA funds (there are only a few units in the PEP and the rest is ISA based) and they provide guaranteed life cover. So not a straight ISA I pay into.

Dunstonh, I think I made a board faux pas with my use of the word "advice". I meant any comments on the funds and the thought processes I was going through
Are you able to expand on why you don't like the funds at all? Also, if I want to investigate a wider fund spread as you suggest, what is my best next step, IFA, L&G direct?

Glad I got around to asking. Thanks again

turbobob

You'd have to check with the L&G whether you can switch to their other ISA funds on that product. I've got a suspicion that you can't although I'm not sure. You may well be able to make lump sum investments or additional regular savings to other L&G funds though to diversify your investment a bit.

I think I'd suggest going to an IFA to see what your options are, given that its a bit more complicated than a simple ISA which you could transfer to another provider etc.

dunstonh

Endowments are a combined product investing in life funds with an element of life assurance attached to them. You have a PEP and ISA invested into unit trusts which is a completely different type of investment. It even has different protection under the FSCS.

The principle is much the same but typically the life assurance can be packaged apart from the ISA (the best ones are) and the ISA is obviously tax free, unlike endowments.

Are you able to expand on why you don't like the funds at all? Also, if I want to investigate a wider fund spread as you suggest, what is my best next step, IFA, L&G direct?

Forget L&G as buying direct or seeing a tied rep (as you did when you bought it) is not the best way to invest. Your choice is either DIY or IFA. If you feel you are up to researching investments and teaching yourself then there are discount brokers/IFAs out there who will take your instructions on what investment funds you want. If you dont have the inclination to go DIY, then you can use an IFA to give the investment advice.

My issue with the L&G funds used here is that you are taking medium/high risk with the investments but the areas invested in are low potential for the level of risk being taken. A bit of diversification, more focused investments on the regular and perhaps aiming for higher yields on the existing lump sums could increase your chances of hitting target in the future. Basically, bring a little strategy to the investing whereas at the moment its a bit hit and hope (as are most tied agent insurance/investment sales).

The_Rogue

Hi there

I have the invested in the same funds with L&G - also as part of a 'mortgage ISA' - which at L&G is not the same as there other ISAs. It sounds the same as mine, and if so you are able to invest lump sums, and there are other funds that you can invest in / switch to.

There is not enough diversity though for me and I'm moving mine to and H&L diy job. A couple of annoying consequences of this though. The major one is that L&G would not allow me to continue the life assurance / critical illness policy if I transferred the funds to another provider. They are part of a package and if you move the ISA the package stops. Pretty annoying as through a market search, the best life assurance deal I can get is with L&G, although more expensive than it was when part of the package. The other smaller issue is that the Worldwide Trust E class shares cannot be transferred as stock - they can only be held by L&G so you must transfer as cash.

Hope that helps

dunstonh

Pretty annoying as through a market search, the best life assurance deal I can get is with L&G, although more expensive than it was when part of the package.

L&G havent come out top for a long time on recent checks. Plus, you dont need to get the same sum assured you started with as the ISA has a value. Plus, make sure its a decreasing term assurance and not a level term assurance.

The other smaller issue is that the Worldwide Trust E class shares cannot be transferred as stock - they can only be held by L&G so you must transfer as cash.

Nothing wrong with that if you arent keeping the same fund.

EdInvestor

dunstonh wrote: »

your choices are:
1 - get rid of and switch to repayment
2 - keep it as it is
3 - utilise a wider spread of investment funds and give yourself more potential for the same or even lower risk.

Or,

move the PEP/ISA to a better provider with a larger choice of quality funds which rebates charges, such as https://www.h-l.co.uk and replace the life cover with a decreasing term insurance policy for a lower amount.

dunstonh

EdInvestor wrote: »

Or,

move the PEP/ISA to a better provider with a larger choice of quality funds which rebates charges, such as www.h-l.co.uk and replace the life cover with a decreasing term insurance policy for a lower amount.

That is option 3 (although the choice to DIY or get an IFA to do it wasnt mentioned). HL do not rebate the charges. They rebate a small amount of the charge. Typically around 0.10-0.25% p.a. is the usual rebate on the annual management charge (which is normally around 1.5%). It should also be noted that if you did switch the investments DIY then you would lose FOS protection to complain about a mis-sale later on.