Should I surrender my endowment policy?

saveabobor2

Hi,
I am thinking of surrendering or possibly selling my Friends Provident endowment policy which I took out in 1988 and has nearly 5 years left to run– details as listed below. I no longer have a mortgage so I am not relying on this policy in that respect. I would appreciate any comments on whether I should ditch this endowment or stick with it the full term. I can’t see much benefit in keeping it, but perhaps someone with better financial knowledge than me could look at the figures and give me some opinions.

Provider Friends Provident
Start date 13/5/1988
Maturity date 13/5/2013
Guaranteed sum assured £6880
Declared bonuses £3854
Surrender value £9988
Monthly premium £26.20
Bonus rate on guaranteed sum 0.00%
Bonus rate on declared bonuses 0.25%
Maturity forecasts:
£13,100 @ 4%
£14,000 @ 5.5%
£15,700 @ 8%
Target amount/life cover £20,000


Am I likely to get more if I sell on the policy rather than surrendering to Friends Provident? If so what is the best way to go about getting a quote from someone else? As I said before, I would really appreciate any advice or opinions.

Thanks.

Dick_here

www.apmm.org

You've nothing to lose by finding out if anybody will pay more than the surrender value, obviously.

You also need to find out the Final/Terminal bonus currently payable, ask what a current policy is actually paying out. It may be that there is no shortfall at all.

EdInvestor

saveabobor2 wrote: »

£13,100 @ 4%
£14,000 @ 5.5%
£15,700 @ 8%

If you cashed it in and put it on seposit@ 5% net of tax also paying in the premiums to maturity, you would end up with 14,518 at no risk.

If you put it in funds inside a maxi ISA and achieved 8% return net of tax you would get 16,584, somewhat more than at FP with the same growth rate.

So there would seem to be no reason to keep this endowment but better to replace it with proper guaranteed savings or a tax free investment.

saveabobor2

Thanks !!!!!! and EdInvestor for your replies and info. Just as a further note I notice that in my latest review statement it does say, in small print, and I quote from the statement:

"Final Bonus: Although Friends Provident has always paid a final bonus on policies such as yours to this date, this is not guaranteed into the future. The illustrative maturity values that we have shown below represent the totals that might be payable including any final bonus. In some circumstances the illustrative maturity value may be just the minimum guaranteed cash sum at maturity."

I did also speak to them today and enquired what rate of terminal or final bonus they are paying on policies such as mine which are maturing presently. They told me they are paying 40%. This a bit different to when they used to always quote a terminal bonus rate on the statements, which they stopped doing a few years ago, but the first rate they quoted was 185%.

Just another question about selling the policy, can you suggest a good place to start getting quotes. I did try one firm, can't remember now who it was, but abandoned the process half way through. Is it normal that they need to know everything, even the policy number etc, and is it safe doing so in this day and age of id theft etc.

Thanks again for any help or comments.