Selling an endowment - worth it?

[Globalti]

Like so many others I have an endowment, which is nowhere near on track to pay the target amount although today the surrender value is nearly double what I have paid into it over 21 years. I have finally lost faith so today I have offered it to a broker and am waiting to see what I am offered for it.

By my reckoning, with investment growth now so dismal, I'm better off flogging it, paying off part of my mortgage and avoiding all those years of mortgage interest as well as saving the £3,176 of monthly contributions remaining.

It still has 52 months to run and I'm aware that there will be a terminal bonus but surely in principle, what I have written in the paragraph above makes sense? What is your own attitude, forum friends?

 

[col]

We cashed ours in years ago.when the solicitor sold it to us,when we got our mortgage,he told us we must never cash it in,since i found out he was lieing to us,for his bonus,we had some home improvements done with the proceeds.Personally,i would not entertain them now,as they seem to be coming up short,and causing major problems for people when they expect a lump sum as well as clearing the mortgage.
I would cash in,and enjoy what you get back.

 

[gbb]

I cashed mine in a few years ago, after it began to fall behind and i started getting the red letters.
Each year it was progressively getting further behind, but they still kept recommending i keep it going ...yeah right.
Basically, i got back what i'd paid in. A good deal ?...certainly not.
Wise to keep it going ?...couldnt do that AND pay the repayment mortgage, so no contest really.

 

[domtyler]

I would recomend getting professional, impartial advice from an IFA.

Also do plenty of research, online, start here:
http://www.thisismoney.co.uk/mortgages/endowments/article.html?in_article_id=417514&in_page_id=55

Buy some magazines, e.g. What Mortgage type pubs.

Have a cooling off period to reflect on your final decision and see if you still feel the same a few weeks later, no point in rushing into anything.

Also do the sums yourself, carefully on a spreadsheet, play around with the figures. We are talking a lot of money here, so a few hours spent making sure you make the correct decision will be the most profitable you can have.

 

[wafflycat]

The answer is: it depends. It depends up what it is valued at, the anticipated surrender value and your personal financial circumstances. What is right for you do do can be entirely different for someone else with different circumstances. Getting an IFA to look at it is a good thing to do.

 

[ChrisKH]

Whilst it does depend on your personal position, the general consensus (in financial circles) this late into the endowment term (assuming it is for 25 years and you have done 21) is not to cash it in. Also you may have a terminal bonus coming that is not factored into the encashment. Lots of factors to consider. Get some independent advice and not from someone who wants to acquire it either.

 

[betty swollocks]

Just done a search and found a reply to a similar post of mine months back. BigFaTallBloke responded and I cut and paste wot he wrote:-

Do not just cash in an endowment without looking at all your options and being aware of the consequences first. You dont necessarily need a financial adviser to do this for you, especially if one of his/he roptions is to encourage you to re invest any surrenfer proceeds into a new policy/plan.

You should obtain a full set of valuations and surrender quotes from your policy provider, which should include future forcasted values on certain assumed growth rates at maturity (these are NEVER guaranteed). You should be fully aware of what fund (s) you are invested in, the managers aims and outlook on the future prospects for that fund, the consequences of withdrawel from any such fund (Including any possible surrender fee and or/ market value adjuster (penalty) on with profits plans that may apply in adverse market conditions). You should become fully aware of any internal fund switch options (alternative funds) available within your current plan which may offer better potential, or a more suited, fund within your existing plan. Be aware of any possible fund switch fees as well although most will allow you to switch free of charge once a year at least.
Many providers charge a monthly 'policy fee' in addition to a bid/offer % . This is a rip off and will detract from your funds growth potential. But moving to a new provider to avoid a policy fee needs to me considered only in light of the other (above) things.

Switching to a repayment option is generally a good thing...it offers a guaranteed way of clearing the debt as long as you maintain payments. But before you do so make sure you a re given/obtain illustrations/quotes from the provider so you can analise the costs against the benefits.

An endowment policy will likely also contain valauable life assurance to clear the mortgage on death...it may (should) also protect against 'critical' illness and 'terminal' illness. Ditching the policy will mean this cover is lost & will need to be replaced. It may cost you more as any new policy(ies) will need to be underwritten at todays rates.

Some endowment plans have an option to convert the plan to life assurance cover and may (in some circumstances) still be a suitable plan.

The issue of miss selling endowments centres around the view that they were sold as a guaranteed plan to repay the mortgage and give an additional lumpsum. In many cases this did happen. However the provider is likely to have provided full key features documentation at the point of sale (which should have been read ) which would clearly have shown this is not the way th eplan actually works and that there is a degree of risk. You would need to show that you were deliberatly mislead by your provider in the sales process. Having said that many peeps have been successful in claims and recieved compensation so it would be worth a try if you feel it applied to you. I am unsure however if the onbudsman is still accepting claims...I think I heard something about a deadline..which may have passed (??)..so check that out.

With regard to any potential new mortgage arrangement...well there are so many, and you would need to see a proper bloke (not a spotty nerd in an estate agent).

Hope this helps - it helped me, so, thanks to BFTB.

 

[LOGAN 5]

We got compensation for mis-sold policies and received several thousand pounds. Then cashed one in as it had years to run and kept the other which expires in 18 months.

 

[Fnaar]

I have a fairly large endowment, which Mrs F tells me delivers what is expected....

 

[Globalti]

Surely the overriding principle has to be that if your endowment is not growing at a rate, which exceeds the mortgage interest rate plus the monthly contributions to the endowment, it's not worth keeping?

That kind of spectacular growth was the basis on which we all bought endowments. As the linked articles point out, they are still growing fast enough to interest institutional investors but not fast enough to interest somebody with a mortgage to pay off.

 

[Cycling Naturalist]

Get some proper advice. Options include selling it (there are about a dozen companies that buy and sell policies) and converting it to fully paid up, thus preserving your entitlement to the terminal bonus. With some companies the TB is a very substantial part of the overall payout and not to be missed.

 

[Bigtallfatbloke]

You mentioned a terminal bonus. That tells me that this plan is a with profits policy as opposed to a unit linked plan. Those bonuses can be a good % of the total payout and it is this that any prospective purchaser would be interested in cleaning up on having had you fund the policy for 23 years. Dont just jump at the first offer to buy it. Get a surrender quote and do your homework, the easier it is to sell the more value you are likely to be losing...common sense right.

 

[asterix]

From my limited 15 years 'working' in the life assurance industry (no, I wasn't a salesman), I'd back what PS and BTFB says.

WRT the 'promise' of additional lump sums after paying the mortgage: many sum policies were sold when inflation was raging and had it remained so the alleged lump sum might have stretched to a packet of peanuts.

We have a WP endowment maturing in a week or two; I'm looking forward to hearing what the terminal bonus will be!

 

[ChrisKH]

You mentioned a terminal bonus. That tells me that this plan is a with profits policy as opposed to a unit linked plan. Those bonuses can be a good % of the total payout and it is this that any prospective purchaser would be interested in cleaning up on having had you fund the policy for 23 years. Dont just jump at the first offer to buy it. Get a surrender quote and do your homework, the easier it is to sell the more value you are likely to be losing...common sense right.

Worth pointing out that no terminal bonus is guaranteed and the companies can if they wanted just not pay out on these, though I think historically no one has yet defaulted big time on this. If the market takes a drastic downturn in the next few years it is possible (outside chance) that this could happen. I think the odds are in your favour though. If it was me, I'd hold on to it to maturity. Had it been under ten or fifteen years I would have maybe thought of the surrender option. But it's your choice. Easy money for you now, means easy money for the company to whom you sell the policy as BTFB says.

 

[Globalti]

Hmmmm. Good advice thanks.