Keep or surrender/sell this endowment?

[palomadove]

Hi,

Grateful for any thoughts... we have an endowment policy tied to the interest-only bit of our mortgage which was intended to pay off £37,000.

But, like most endowments taken out in the late 90s, over the last 10 years it has under-performed and the guaranteed amount it will pay in just under 7 years time is just over 28,000.

This isn't a problem for us, as we have overpaid the mortgage to cover it - however, we are wondering if continuing to pay £130 a month premiums is throwing good money after bad? If we surrendered it now, we would get a guaranteed £18,000 - maybe more if we sold the policy rather than surrendering it. We could then convert the remaining amount of the mortgage to repayment, and it would save £34 a month overall.

What are your thoughts about how the endowment market might perform over the next six years? It's with Friends Provident if that's any help.

tia

Hi Tia

By my calculations £130 a month over 7 years is just over £10k, which added to your current £18k guaranteed is just over £28k, or what they say you will get at the end of it anyway. So that assumes no growth in the investments over the next 7 years, which isn't terribly encouraging!

When you say converting the rest of the mortgage to repayment would save you £34 overall, do you mean it would cost an extra £96 on top of what you are paying currently?

Thanks - I posted this in "money" too and had a number of replies - the consensus seemed to be that it would be a close call, but probably best to cash it in and convert to repayment.

The £34 per month saving would be total per month - we wouldn't have the £130 to pay for the endowment, and although the mortgage would go up, the overall cost would be less.

The guaranteed amount would be if there is no growth, if it grew at 4% then it would be £32,300 - so it's like all stock-market based investments - a risk. Greater growth would bring a greater return, so I'm trying to second-guess - the markets are picking up a bit.