Another endowment cash in/keep question if you please..AXA..

eanie_meanie

Hi
Could any of you kind people offer some advice please?
We had decided to move back to be closer to family recently but are now tetering as whether we'd be better staying put for a little while. This has however prompted us to look at our mortgage situation.

We have 2 endowments due to mature in 2010 which we kept on as savings plans (seemed a good idea at the time) when moving to our present home in 1999.

Usual story I'm afraid we were told the policy would more than cover the mortgage amount and we would even have a lump sum over but nothing in writing of course!
The main one is an AXA low cost homebuyers plan (equity & law at the time). These are the details but I'm not sure what they all mean if I'm honest...

• date of policy 14/11/85
• maturity date 14/11/10
• monthly premium £32.39
• target amount £16500
• guaranteed maturity value £9888
• guaranteed interest rate 3% pa
• has been paying nil regular bonus rate for last few years but .75% from Sept '07.
• projected maturity value (on sept '07 statement) @ 4% £14400, @ 6% £15300
• its a unit linked policy and we hold 2261.94 as at today
• Surrender value as of today £13048.17
• they are currently paying 40% terminal bonus which is reviewed sept & feb each year.

Would we be better off surrendering and paying this off towards the mortgage (we owe approx £28k)?

Any help and advice would be greatly appreciated

EdInvestor

What interest rate are you paying on the mortgage?

Dick_here

Is it normal to pay a Terminal Bonus on a unit-linked plan ? Where does it come from ? The value upon maturity is surely the unit value that day, not more than that.

EdInvestor

I imagine the policy is actually unitised With profits - a kind of hybrid between conventional WP ( with a guaranteed sum assured, declared bonus and a terminal bonus) and unit linked (with a daily changing unit value only.)

Unitised WP endowments have a regularly changing unitised value plus a terminal bonus.Usually there is no explicit guaranteed value, though you do sometimes get a guaranteed interest rate, as with this policy.

eanie_meanie

thanks - mortgage rate is 6.6%.

No idea about the other comments, I looked at similar threads and saw what info people asked and then rang AXA earlier. The girl said that it was a unit linked policy although there's nothing I can see on any of our statements which states this, I did double check with her. She said something about depends what the bid price is on the day. There is a guaranteed value of £9888 and final bonus (hopefully) but current maturing policies are 40%.

Sorry if this is a bit patchy but we've never understood this policy.

Towards the end of the call the girl did admit that the policy had not performed well

EdInvestor

eanie_meanie wrote: »

• projected maturity value (on sept '07 statement) @ 4% £14400, @ 6% £15300

If you cashed it in and used the money to reduce your mortgage, also increasing your mortgage payment by the amount of the endowment premium to maturity, your return would be 16,364, which comfortably beats their projections and is a guaranteed amount, no risk.

.

eanie_meanie

....if I'm understanding this correctly though, there could be an additonal lump sum on top of the maturity amount ie final bonus - this is what the risk is, together with the possibility that the maturity amount may be even lower than the projections due to lower unit/bid prices??? Would this become more likely if/when we do go into recession?

Dick_here

eanie_meanie wrote: »

Hi
The main one is an AXA low cost homebuyers plan (equity & law at the time).

My policy is a 'Homebuyers Investment Plan' with them. I dug it out having read this thread and it is unit-linked only, no with-profits element at all. If yours is the same then all you'll miss out on by surrendering is the life cover. In fact, surrendering is a bit of a misnomer I'd say, all you're doing is selling your units for their current value which is all that will happen upon 'maturity'. The life cover was paid for in the first couple of years btw.

eanie_meanie

hi - not sure our policy is the same, I've had another look at the paperwork and it was an Equity & Law low cost homebuyers plan.

In the booklet it states ' low cost homebuyers plan is a with profit mortgage endowment plan...' and goes on to say ' equity and law currently pays terminal bonus on maturing with profit policies and it it the intention to pay terminal bonus on the low cost homebuyers plan if investment conditons over the term of the plan are sufficiently favourable..'

Worringly there are two lots of papers in with this booklet on which the printing has faded so much they are impossible to read, looks like they were done on one of the old fashioned copiers before photo copiers.

The only other bit of paper we have which actually refers to us personally is a schedule and the last paragraph of this states

'for information only (not part of the contract)
The benefits and contributions have been calculated assuming that the bonus attaching at maturity is 80% of the projected reversionary bous at maturity assuming the rate of reversionary bous current on the Date of the Policy is maintained.'

I have no idea what this last paragraph means - if anyone can give me an explanation in plain english please it would be greatly apprectiated

Cheers

Dick_here

So where does the unit-linked element come into it ? It sounds like a straightforward with-profits endowment now, which is exactly the opposite to mine !

EdInvestor

eanie_meanie wrote: »

....if I'm understanding this correctly though, there could be an additonal lump sum on top of the maturity amount ie final bonus

I think you'll find the maturity projections include the TB element but do check.The surrender value does include the accumulated TB.

Obviously the maturity amount could be lower than the projections if the current period of poor market returns goes on.

The policy certainly seems to be a unitised WP one.Most post-1988 mortgage endowments are like this.