Poorly performing investment - sell??
Discussion
I would be grateful for some advice on deciding wheter to cash this plan in or not.
Plan started April 97 and matures April 22.
Monthly payments are £50 and total value on 1st April 12 is £10127.
Future payments under plan are £5950.
If cashed in would on 1st April 12 would get £10127 reduction of £167 applies.
This is a fund which is 100% with profits and has 2093 units.
Estimated return at lower rate is £20k, at mid rate is £20k and at high rate is £23k.
From what I can see I will be likely to only make £4k in 10 years after todays value and further contributions - am I correct?
If I was to cash this in for 10k I have approx £23k in home improvement loans this could help to pay off.
My gut feeling is to take the payout and do this - any advice is appreciated.
I should add that the loans have an APR of 9%.
Plan started April 97 and matures April 22.
Monthly payments are £50 and total value on 1st April 12 is £10127.
Future payments under plan are £5950.
If cashed in would on 1st April 12 would get £10127 reduction of £167 applies.
This is a fund which is 100% with profits and has 2093 units.
Estimated return at lower rate is £20k, at mid rate is £20k and at high rate is £23k.
From what I can see I will be likely to only make £4k in 10 years after todays value and further contributions - am I correct?
If I was to cash this in for 10k I have approx £23k in home improvement loans this could help to pay off.
My gut feeling is to take the payout and do this - any advice is appreciated.
I should add that the loans have an APR of 9%.
Cheib said:
You don't say what it's invested in ? I assume equities ?
Regardless of that there aren't many funds that return 9% a year so you should definitely cash it in.....
If it's a with-profit fund then it will be invested in a basket of assets, including equities, which may change over the lifetime of the policy.Regardless of that there aren't many funds that return 9% a year so you should definitely cash it in.....
It is important to understand exactly the type of policy this is, in particular whether there is any life cover attached and whether there are any guarantees included.
If the OP can provide more information, we can provide a better answer.
I'd agree that in the absence of significant new information, paying off a loan being charged at 9.5% is probably the right thing to do.
Sidicks
Sorry meant to say it is a Standard Life versatile investment plan.
Bought 15 years ago through an IFA but it seems to be doing very little.
On balance given what the monthly payment of £50 used to buy 15 years ago I would say it has lost a massive amount.
There is life cover of approx £11k which I don't need probably overinsured but that is me.
No guaruntees of any description that I can find in the paperwork.
Bought 15 years ago through an IFA but it seems to be doing very little.
On balance given what the monthly payment of £50 used to buy 15 years ago I would say it has lost a massive amount.
There is life cover of approx £11k which I don't need probably overinsured but that is me.
No guaruntees of any description that I can find in the paperwork.
tyrone1973 said:
Sorry meant to say it is a Standard Life versatile investment plan.
Bought 15 years ago through an IFA but it seems to be doing very little.
On balance given what the monthly payment of £50 used to buy 15 years ago I would say it has lost a massive amount.
When this policy was taken out, the FTSE 100 index would have been at around 6,600 - It is now under 6000. Clearly the impact of £ cost averaging will have helped a bit, but the fact your policy hasn't made much money shouldn't be a particularly surprise given:Bought 15 years ago through an IFA but it seems to be doing very little.
On balance given what the monthly payment of £50 used to buy 15 years ago I would say it has lost a massive amount.
a) market performance
b) the expenses which have been taken out of the fund to pay your IFA's commission
c) ongoing admin charges
d) ongoing life cover
Obviously future gains will depend on investment performance over the remaining term - as it is a with-profit policy, there may be possibility of a terminal bonus at maturity. The with-profit fund is likely to have some in-built guarantees which could provide protection against adverse investment markets.
The actual amount you receive could therefore be significantly more than the £23k quoted, but obviously could also be less.
tyrone1973 said:
There is life cover of approx £11k which I don't need probably overinsured but that is me.
No guaruntees of any description that I can find in the paperwork.
I would agree that if you don't need the life cover and if you can pay off a loan currently being chraged at 9.5% APR then that would probably be the best option.No guaruntees of any description that I can find in the paperwork.
Sidicks
With Profits is an old opaque outtdated investment vehicle provided by insurance companies.
Very few companies still sell them. The asset allocation is controlled by actuaries and WP use 'smoothing' which offsets good performance years to give all holders a 'fair' annual bonus.
The difficulty is that many With Profits funds have exit penalties .
You should speak with an IFA about moving your funds to a more appropriate product, if posdible .
Very few companies still sell them. The asset allocation is controlled by actuaries and WP use 'smoothing' which offsets good performance years to give all holders a 'fair' annual bonus.
The difficulty is that many With Profits funds have exit penalties .
You should speak with an IFA about moving your funds to a more appropriate product, if posdible .
Edinburger said:
With Profits is an old opaque outtdated investment vehicle provided by insurance companies.
Not necessarily outdated - a product with in-built guarantees, a diversified investment strategy and some smoothing makes a lot of sense for a lot of people.With-profit funds are no longer anywhere near as opaque as they were years ago. Read the Standard Life PPFM for more details as ro how their with-profit fund is managed.
Edinburger said:
Very few companies still sell them.
Few companies sell new policies, but there are £bn in existing policies and milions of people stil pay into existing policies.Edinburger said:
The asset allocation is controlled by actuaries and WP use 'smoothing' which offsets good performance years to give all holders a 'fair' annual bonus.
Not really a very accurate interpretation of how smoothing works or the allocation of bonuses.Edinburger said:
The difficulty is that many With Profits funds have exit penalties .
I think you are confusing exit penalties which are typically based on product type (and designed to recoup initial expenses and commission) with MVA (market value adjustments) which are used to reduce the value of funds leaving a with-profit fund where the value of underlying assets (the asset share) is less than the unit value of the policy.Where the opposite situation is present, a TB (Terminal Bonus) may be paid to increase the amount payable to the customer.
Edinburger said:
You should speak with an IFA about moving your funds to a more appropriate product, if posdible .
The product is not necessarily inappropriate, but if life cover is NOT required then a different investment product might be better. The with-profit investment option is not necessarily inappropriate.Sidicks
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