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Selling endowment policy?(15 Posts)
I have a unit linked endowment that started in 1999 and matures 2024. It is on track to payout the full amount on maturity (premiums were upped slightly about 5 yrs ago).
We no longer have an interest-only mortgage (moved twice since then), and it is quite annoying to be paying out on this every month and to not have the benefit of the capital that is in it (it is currently worth about 10% of current mortgage). We took out a longer repayment mortgage than we would otherwise have done, and when this matures it will be used to pay down the mortgage and reduce the term.
I have been using the mortgage calculator that has been linked from here in the past (thank you) and worked out that there is possibly not a huge difference between (a) using a surrender of the endowment to pay off a bit of the mortgage now and instead of paying the endowmt premium use that money to overpay on the mortgage, and (b) our current plan of waiting until it matures
We have fixed interest rate for 5 years, so option (a) would be even more attractive in 5 years time, plus it gives more certainty/less risk. DH has one too from his first house and he sees it as an investment/savings plan.
So I was wondering (and I realise it is hard without the specifics) -
(1)can these policies be surrendered for close to their value that would be on the policy statement on that date?
(2) How do you do that, do you have to find a company that will buy it off you, and
(3) are there any tax implications for surrendering? (The policy is still 'qualifying' for tax purposes as long as I don't accept any future recommendations for premium increases).
I will seek formal advice but just thinking about the options at the moment, thanks
It is life assurance though so don't be too hasty in surrendering it.
yes that's true, and critical illness, but I have much bigger cover on both through work
Contact the company and ask for a surrender value and projected maturity values. Check if they have any kind of guarantee or 'promise' in place. Calculate how the projected maturity values (be careful with the rates used for the projections as some use 5, 7 & 9% yet are earning far less on an annual basis) compare with the surrender value and premiums you'd be paying til maturity. Bear in mind they offer life cover and then decide from there. Not sure if you can still sell endowments but you can certainly surrender it if you'd prefer to.
if it is really on target to pay as predicted its like gold dust at the end of the rainbow
do not let ANYBODY buy it from you at less than the full actuarial value (message me the detail and I'll check)
but even then
I cannot think of any firm that is on target but if you have one STAY with it
It has been on track for a while, and my last statement in July a growth assumption of 6% gave a surplus, I think it needs somewhere between 4% and 5% growth to stay on track.
I will get a surrender value so I can at least see what impact it would have on the mortgage.
if you don't mind saying, which company?
Reading this with interest as we've also got an with profits? endowment which is on track (clerical medical) to pay out in 15 years and it also needs 4% to stay on target and wondered if we should convert it.
if yours has 15 years to run the predictions may be less junk than mine were
one was Clerical Medical to cover a £31,000 mortgage and the cheque was for £24,400 - which included £100 extra because I checked their maths and they had ripped me off so gave me extra back
I paid in £12,000 by the way
the other is Legal and General to cover a £22,000 mortgage and when it matures this summer I'm anticipating £15,000
having paid in £8,500
so 20% shortfalls on both.
Ignore the maths in their 'projection' letters - its rubbish
I use an actuarial spreadsheet I wrote as even they cannot tell me the formula to get to the numbers the generate
my prediction on the Clerical Medical was within £20.00
That's a good point re their projections. My detailed projection letter is 3 months later than the statement with a value in it (and there was significant growth last year) -but using some very basic estimates and basic compound growth I get a reasonably similar figure.
Mine is with Countrywide Assured. I took it out 1999 and I think the era of wild projections at the time of taking a policy was over by then, there had already been bad press (I never told my dad I had an interest only mortgage). Obviously if the economy goes belly up again then it won't pay out as hoped.
As just an ordinary person (no financial qualifications at all you understand...) it still seems to me though, that if you pay in - say in the example above - £12000 and get life cover for the duration and then get given back £24000 ..... or Pay in £8,500 and get the life cover and then get back £15000 if you don't need to claim on the life cover, then that's no bad deal?
If you saved those monthly payments, and paid separately for life cover out of them, then I can't imagine getting such a good return.
but the first one I still have the original letter that promised us £47,000
and the second one was "certain" to produce £40,000 ....
and if I HAD needed them to cover my mortgage I'd have been stuffed.
Yes, but (if, as I suspect, like me) if you took them out when we were paying 15% mortgage rates, then times were very different.
As the rate we were all paying on our mortgage rates came down, then obviously so did the rates being received on the endowments. The 'spare money' we all had from our predicted monthly mortgage payments, from the rates dropping so much, was then available for saving to meet the shortfall, or directly paying off capital.
I still don't get why these endowments have been vilified
although did make a claim and receive a few £thousand for the mis-selling, as they were giving it away. I genuinely don't think we got a bad deal at all.
Sorry Pirate - just pondering away, no help to you
no probs BackforGood. I also calculated that that was actually a reasonable rate of return (by today's standards). Just not what was promised.
I knew full well I was taking a risk when I took an endowment, but I was 23 and certain to have a pretty big series of payrises in the future, and that first house needed a lot of work done to it. So a slightly lower payment each month was a fair payoff for the risk.
Just annoying I can no longer have a part-and-part mortgage.
because the commissions were entirely front loaded out of the payments
because the predictions we were given in the 80's were known to be bilge by insiders even then
and then when the eejit Broon allowed non repayment vehicle IO mortgages to "maintain growth" wise heads were shouted down
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