How had my investment done?

[sparkythecat]

37 years ago I took out an endowment policy into which Ive paid £15 per month. A statement arrived today to tell me that the current surrender value is £16,884
Given that over that period I've invested £6660, how does my investment rate? Has it done well or badly?

[Amateurish]

That's equivalent to an annual return of 4.5% so not that great really

[NickCQ]

4.5% compounding return. Not great not terrible. What were the underlying assets? If equities, they should have generated 6-7% after fees.

[LeoSayer]

If it's an endowment typical of those sold in the 80s and 90s as a mortgage repayment vehicle then there will have been a lot of 'smoothing' going on to reduce risk and remove the impact of market drops towards the end of the term.

[PorkInsider]

Just keeping up with inflation (using BoE inflation figures for last 37 years) would have seen you at roughly £11,200.

By that I mean simply taking the first year's £180 and increasing by annual inflation, adding to that the next year's £180 and increasing the total by annual inflation, and so on.

Edited by PorkInsider on Friday 25th June 16:43

[PorkInsider]

NickCQ said:

4.5% compounding return. Not great not terrible. What were the underlying assets? If equities, they should have generated 6-7% after fees.

I make it roughly: £20k at 5%, £26k at 6% and £33k at 7% then?

[Mr Pointy]

4.506% indeed according to this calculator:

https://www.calculator.net/investment-calculator.h...

[Simpo Two]

LeoSayer said:

If it's an endowment typical of those sold in the 80s and 90s as a mortgage repayment vehicle then there will have been a lot of 'smoothing' going on to reduce risk and remove the impact of market drops towards the end of the term.

Sadly it removed the impact of market gains towards the end of the term. But the £15pcm would otherwise have been frittered away which would mean a value of £0 today, so better than a poke in the eye.

[sparkythecat]

Simpo is right. When I took out the policy I was of an age that would have otherwise spent the money in the pub.

[snabzter]

Did you also have life cover with the endowment policy? If so part of your £15 a month will have paid for that and that would need to be allowed for in the annual return calculation.

Was it a with profits policy? If so, did the statement mention the terminal/final bonus amount?

[sparkythecat]

Yes there was and still is life cover of £8200 attached to the policy. The policy has no fixed term and so there was no terminal bonus.

If I surrendered it now, what could I do with my £16k to net more than 4.5% in interest?

[snabzter]

Is it an endowment policy or a whole of life policy? An endowment policy usually has a fixed term. A whole of life doesn't.

Is it a with profits policy, a unit linked policy or a non profit policy?

[Simpo Two]

sparkythecat said:

Yes there was and still is life cover of £8200 attached to the policy. The policy has no fixed term and so there was no terminal bonus.

If I surrendered it now, what could I do with my £16k to net more than 4.5% in interest?

Invest it elsewhere, but that's a whole 'nother ball game I can't advise you on, and it would entail some risk.

[Mr Pointy]

sparkythecat said:

If I surrendered it now, what could I do with my £16k to net more than 4.5% in interest?

Well I'll roll out my usual indicator: If you'd put it into Fundsmith you'd have averaged 18.1% a year & this year so far you'd be 6.1% up. May is down 1% though:
https://www.fundsmith.co.uk/fund-factsheet

Of course, past performance is no guarantee of what happens in the future.

[red_slr]

sparkythecat said:

Yes there was and still is life cover of £8200 attached to the policy. The policy has no fixed term and so there was no terminal bonus.

If I surrendered it now, what could I do with my £16k to net more than 4.5% in interest?

If it were me I would do one of two things.

(both in a S&S isa)

1 buy shares in a tech company, apple, fb or google.

or

2 buy a "fund of funds" type fund i.e VLS100.

IANAFA!