Is it a good/bad idea to stop paying into an endowment

[redskyatnight]

About 15 years ago DH took out an endowment linked to the mortgage on a flat he'd bought.

He has long since sold the flat and of course endowments are no longer in "fashion". Our current house has a straight repayment mortgage but DH has continued to pay into the endowment. The market being as it is the endowment is predicted to make a fraction of what was originally forecast. We're both now questioning whether it is worthwhile to continue paying the money in or whether we should save (or spend!) it in some other way.

What we're not sure about is whether stopping making regular payments would adversely affect the value of the endowment (we would still let it run for the remaining 10ish years, just not put any more in).

Any advice gratefully received.

Contact the insurance company with whom the policy is held, and ask for the surrender value. Explore the second-hand endowment policy market (yes, there is one!) and see what you might get there. Bear in mind that in 10 years time, the market could be quite different, and also that interest rates are so low it's hardly worth saving in most accounts atm.

I don't know what happens if you just stop paying - best to ask the insurance company.

I sold mine. This was more of an emotional decision than a practical one. It was awfully old, almost worthless, and it irritated me seeing the direct debit because it was such a worthless investment.

You can stop making contributions by asking the insurance company to make the policy paid up. That means you stop making contributions but the pot already invested stays invested and gives you the pay out on maturity. You then wait until normal maturity date for the payout.

This would usually get you a better return than simply cashing in the policy or selling it on as a large chunk of the maturity value comes from the terminal bonus which is added only on maturity. Though these have been ower recently, they are still better than cashing in. Remember that the companies who buy these policies do it to make a profit so they expect to gain more than they pay you for the policy.

Cashing in with the insurance company is usually an even lower return because they simply do not want to do this and only do it because they are legally obliged to offer the option. So the rates they offer are designed to put you off.

Unless you desperately need some cash from this now you would be better advised to make the policy paid up, so stopping contributions, and wait until maturity for the payout.

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