Endowment poser
Discussion
I have no idea what to do here. I'm not expecting a precise answer; an indication of what's best would be great.
In the 80s, my wife and I took an endowment mortgage to buy our first flat (West London).
The mortgage was for £62.5k. We sold the flat a few years ago but kept the endowment policy going.
The policy is due to mature in May and is currently worth just over £68k.
The management company have written to me asking if I want to take the cash or keep it going for a further 10 years.
The monthly payment is £301.
Any thoughts on what to do?
The cash would be quite useful for property project we're about to embark on but I'm fairly confident I can finance it without the £68.
Apologies if I sound like a bit of a ninny but anything to do with money makes me deeply depressed.
Thanks in advance.
Cheers,
Eric
In the 80s, my wife and I took an endowment mortgage to buy our first flat (West London).
The mortgage was for £62.5k. We sold the flat a few years ago but kept the endowment policy going.
The policy is due to mature in May and is currently worth just over £68k.
The management company have written to me asking if I want to take the cash or keep it going for a further 10 years.
The monthly payment is £301.
Any thoughts on what to do?
The cash would be quite useful for property project we're about to embark on but I'm fairly confident I can finance it without the £68.
Apologies if I sound like a bit of a ninny but anything to do with money makes me deeply depressed.
Thanks in advance.
Cheers,
Eric
Well presumably the monthly premium includes an element of life cover, so you need to decide whether you still want / need that (and if so, at what cost you can obtain that separately).
If you don't need the life cover I'd expect you'd be better off by ceasing the policy and investing the premium in a new savings policy.
Sidicks
If you don't need the life cover I'd expect you'd be better off by ceasing the policy and investing the premium in a new savings policy.
Sidicks
If you carry on for another ten years, are you locked into that and unable to change you mind if you need to access the funds?
If it were me, I'd take the money. Put into an ISA account sheltering a FTSE tracker. One ISA for you, a second for your wife. Thats more than £20k protected from tax. Put the rest into a high interest notice account. When April 2012 comes around you can transfer the next max chunk into the ISAs. Over 10 years you should get good returns on the trackers and all gains will be tax free.
Oh, if your wife does not work, put half the money into an account in her name that's paying interest with no tax deducted.
If it were me, I'd take the money. Put into an ISA account sheltering a FTSE tracker. One ISA for you, a second for your wife. Thats more than £20k protected from tax. Put the rest into a high interest notice account. When April 2012 comes around you can transfer the next max chunk into the ISAs. Over 10 years you should get good returns on the trackers and all gains will be tax free.
Oh, if your wife does not work, put half the money into an account in her name that's paying interest with no tax deducted.
(sorry Eric)Hi Eric,
I would think, if you multiply the monthly payment by the amount of months, you'll get bwhat you paid in. If what they are paying you is not bigger (by how much is for you to decide) then they have pumped you plenty already. ( i sold mine, it was a dog, in about 14 yrs i only just got back what i put in - not a good investment)
I would think, if you multiply the monthly payment by the amount of months, you'll get bwhat you paid in. If what they are paying you is not bigger (by how much is for you to decide) then they have pumped you plenty already. ( i sold mine, it was a dog, in about 14 yrs i only just got back what i put in - not a good investment)
Tell me you've not been paying £301 pm for the last 25 years? As by my reckoning you've lost out big time.
I'd take the money and enjoy it or invest elsewhere with some easy access as rates will be unpredictable next few years.
I'm in a similar position with a endowment for my first mortgage in the late 80s execept mine was for £33k at £45pm on 25 years. I will have paid £13.5k in and its on track to (just) pay the £33k. I thought many times to cash it in after I converted to a repayment mortgage many years ago but at the nominal amount per month I couldn't be bothered so treated it as a savings plan with some life insurance.
I've been mortgage free for a few years now so will look to do something with it when the cheque drops through. No pockets in shrouds I keep getting told as for some reason my cash 'reserves' are quite buoyant after I became disillusioned with the market 10 years ago. Still got some PEPS (remember those?) and they are doing quite well.
I'd take the money and enjoy it or invest elsewhere with some easy access as rates will be unpredictable next few years.
I'm in a similar position with a endowment for my first mortgage in the late 80s execept mine was for £33k at £45pm on 25 years. I will have paid £13.5k in and its on track to (just) pay the £33k. I thought many times to cash it in after I converted to a repayment mortgage many years ago but at the nominal amount per month I couldn't be bothered so treated it as a savings plan with some life insurance.
I've been mortgage free for a few years now so will look to do something with it when the cheque drops through. No pockets in shrouds I keep getting told as for some reason my cash 'reserves' are quite buoyant after I became disillusioned with the market 10 years ago. Still got some PEPS (remember those?) and they are doing quite well.
fridgedoctor said:
Hi Eric,
I would think, if you multiply the monthly payment by the amount of months, you'll get bwhat you paid in. If what they are paying you is not bigger (by how much is for you to decide) then they have pumped you plenty already. ( i sold mine, it was a dog, in about 14 yrs i only just got back what i put in - not a good investment)
But you need to factor in the cost / value of the life insurance received over the period too, otherwise you aren't comparing like with like!I would think, if you multiply the monthly payment by the amount of months, you'll get bwhat you paid in. If what they are paying you is not bigger (by how much is for you to decide) then they have pumped you plenty already. ( i sold mine, it was a dog, in about 14 yrs i only just got back what i put in - not a good investment)
Sidicks
Kiltie said:
I have no idea what to do here. I'm not expecting a precise answer; an indication of what's best would be great.
In the 80s, my wife and I took an endowment mortgage to buy our first flat (West London).
The mortgage was for £62.5k. We sold the flat a few years ago but kept the endowment policy going.
The policy is due to mature in May and is currently worth just over £68k.
The management company have written to me asking if I want to take the cash or keep it going for a further 10 years.
The monthly payment is £301.
Any thoughts on what to do?
The cash would be quite useful for property project we're about to embark on but I'm fairly confident I can finance it without the £68.
Apologies if I sound like a bit of a ninny but anything to do with money makes me deeply depressed.
Thanks in advance.
Cheers,
Eric
If it's only worth 68k then if you have had it only 20 years (nevermind 25) you've had your pants royaly pulled down.In the 80s, my wife and I took an endowment mortgage to buy our first flat (West London).
The mortgage was for £62.5k. We sold the flat a few years ago but kept the endowment policy going.
The policy is due to mature in May and is currently worth just over £68k.
The management company have written to me asking if I want to take the cash or keep it going for a further 10 years.
The monthly payment is £301.
Any thoughts on what to do?
The cash would be quite useful for property project we're about to embark on but I'm fairly confident I can finance it without the £68.
Apologies if I sound like a bit of a ninny but anything to do with money makes me deeply depressed.
Thanks in advance.
Cheers,
Eric
£301 x 240 months (20 years) = £72240
£301 x 300 months (25 years) = £90300
Cash it in and invest it a better scheme or spent it as either way you'll be getting a better deal than the endowment.
wolf1 said:
If it's only worth 68k then if you have had it only 20 years (nevermind 25) you've had your pants royaly pulled down.
£301 x 240 months (20 years) = £72240
£301 x 300 months (25 years) = £90300
Cash it in and invest it a better scheme or spent it as either way you'll be getting a better deal than the endowment.
As I stated above, the numbers don't work like that.£301 x 240 months (20 years) = £72240
£301 x 300 months (25 years) = £90300
Cash it in and invest it a better scheme or spent it as either way you'll be getting a better deal than the endowment.
I'm not saying the endowment is good value, and you are probably better off cashing this in and taking out an ISA for future payments, but you do need to make sure you make a valid comparison between the maturity value, the premiums paid and the life cover received.
Sidicks
The rough assessments here are adequate to give a view on the value for money of the endowment I reckon, though it's correct that life cover needs accounted for.
For an endowment taken out in the '80s £301 is a whopping premium for a £60k-ish target - I can't see how that can be right. I pay £44.01 for a £35k 25 year endowment started in 1990.
For an endowment taken out in the '80s £301 is a whopping premium for a £60k-ish target - I can't see how that can be right. I pay £44.01 for a £35k 25 year endowment started in 1990.
Most of your payment into an endowment policy is paying for life assurance. They didn't tell us that back in the early 80's though, and many of us were promised the sum assured and then some. Cash it in unless you need the life cover, in which case get some quotes for life cover and compare.
-Pete- said:
Most of your payment into an endowment policy is paying for life assurance. They didn't tell us that back in the early 80's though, and many of us were promised the sum assured and then some. Cash it in unless you need the life cover, in which case get some quotes for life cover and compare.
totally incorrect - the life cover would have been a relatively small component of any endowment premium!Sidicks
Oh, ok, what proportion would typically be paying for life cover, or is there no typical?
What I can tell you is I was sold various endowments, the largest of which is scheduled to pay 63% of it's "Guaranteed Sum" in March 2013* (using the middle projection, 5.5% I think).
* which means I took it our before 5th April 1988 and therefore couldn't complain about being sold a life policy I didn't need or being promised at least 20% bonus at the end of term. Not that I'm bitter or anything
What I can tell you is I was sold various endowments, the largest of which is scheduled to pay 63% of it's "Guaranteed Sum" in March 2013* (using the middle projection, 5.5% I think).
* which means I took it our before 5th April 1988 and therefore couldn't complain about being sold a life policy I didn't need or being promised at least 20% bonus at the end of term. Not that I'm bitter or anything
-Pete- said:
Oh, ok, what proportion would typically be paying for life cover, or is there no typical?
There is no typical, it would depend on the term of the endowment, the age at entry, whether it was single or joint life etc.I'm thinking maybe 10% as a very rough guess.
-Pete- said:
What I can tell you is I was sold various endowments, the largest of which is scheduled to pay 63% of it's "Guaranteed Sum" in March 2013* (using the middle projection, 5.5% I think).
I don't really understand - if this is a with-profit policy then the policy would have to payout the minimum guaranteed sum plus reversionary bonuses added to date (once added they cannot be taken away).It sounds like you are actually referring to a 'projected' sum at maturity (or similar) which is not guaranteed??
-Pete- said:
* which means I took it our before 5th April 1988 and therefore couldn't complain about being sold a life policy I didn't need or being promised at least 20% bonus at the end of term. Not that I'm bitter or anything
So you are saying that you took out an endowment policy and:a) weren't told that the policy included life cover if you died during the term?
b) were told that the policy was guaranteed to produce the required lump sum, rather than 'highly likely' pay the lump sum based on appropriate projection rates at the time?
You need to remember that, due to interest rates reducing significantly over the term of the policy, although the endowment policy will produced a lower payout than originally anticpated, this will also have meant that the interest only mortgage which accompanied it (presumably) was also much cheaper over the period...??
Sidicks
S:It sounds like you are actually referring to a 'projected' sum at maturity (or similar) which is not guaranteed??
P:The front page says guaranteed sum (NM Home Loans, now Schroeder) but page 17 or whatever mentions that's only if I die. The salesman said guaranteed.
S:So you are saying that you took out an endowment policy and:
a) weren't told that the policy included life cover if you died during the term?
P: I was told I had to have this life cover, despite no dependants.
b) were told that the policy was guaranteed to produce the required lump sum, rather than 'highly likely' pay the lump sum based on appropriate projection rates at the time?
P: Yes, exactly. I was guaranteed the lump sum, plus 20% or more on top.
S:You need to remember that, due to interest rates reducing significantly over the term of the policy, although the endowment policy will produced a lower payout than originally anticpated, this will also have meant that the interest only mortgage which accompanied it (presumably) was also much cheaper over the period...??
P: No idea, but assuming that's true, does that make it alright?
When I got the warning letters I changed 1/3rd of my mortgage to repayment, but according to the latest projections I'm not even close to paying it off. I'm pretty certain that the bank of under-Ken-Dodd's-mattress would have given me a better return than the endowment policies I have.
But that's history. Tomorrow is another day
P:The front page says guaranteed sum (NM Home Loans, now Schroeder) but page 17 or whatever mentions that's only if I die. The salesman said guaranteed.
S:So you are saying that you took out an endowment policy and:
a) weren't told that the policy included life cover if you died during the term?
P: I was told I had to have this life cover, despite no dependants.
b) were told that the policy was guaranteed to produce the required lump sum, rather than 'highly likely' pay the lump sum based on appropriate projection rates at the time?
P: Yes, exactly. I was guaranteed the lump sum, plus 20% or more on top.
S:You need to remember that, due to interest rates reducing significantly over the term of the policy, although the endowment policy will produced a lower payout than originally anticpated, this will also have meant that the interest only mortgage which accompanied it (presumably) was also much cheaper over the period...??
P: No idea, but assuming that's true, does that make it alright?
When I got the warning letters I changed 1/3rd of my mortgage to repayment, but according to the latest projections I'm not even close to paying it off. I'm pretty certain that the bank of under-Ken-Dodd's-mattress would have given me a better return than the endowment policies I have.
But that's history. Tomorrow is another day
-Pete- said:
P:The front page says guaranteed sum (NM Home Loans, now Schroeder) but page 17 or whatever mentions that's only if I die. The salesman said guaranteed.
Sounds like poor literature and / or porr salesman-Pete- said:
P: I was told I had to have this life cover, despite no dependants.
So how would the mortgage have been repaid if you had died?-Pete- said:
P: Yes, exactly. I was guaranteed the lump sum, plus 20% or more on top.
Again, sounds like poor salesman - did you read the literature?-Pete- said:
P: No idea, but assuming that's true, does that make it alright?
If the salesman was dodgy then no. But it does explain why the endowment failed to reach its projected payout.-Pete- said:
When I got the warning letters I changed 1/3rd of my mortgage to repayment, but according to the latest projections I'm not even close to paying it off. I'm pretty certain that the bank of under-Ken-Dodd's-mattress would have given me a better return than the endowment policies I have.
But that's history. Tomorrow is another day
It does sound as though the salesman didn't give you the full picture. On the other hand, did you read the accompanying literature and did you fully understand the product you were buying (it seems not).But that's history. Tomorrow is another day
Whilst many people were undoubtedly mis-sold endowment policies, there are plenty of others who had a choice of a unit-linked policy (like this one) and a (more expensive) with-profit (or a less common, non-profit) policy which would have guaranteed to pay off the mortgage at maturity.
However, at the time of high investment returns people were prepared to gamble that they could pay lower premiums and investment returns would be sufficient to make up the difference. (For a with-profit policy the equivalent approach would be to reduce the guaranteed sum assured below the rquired amount and implicitly assume a certain level of bonuses to make up the shortfall.
When investment returns fell, the gamble didn't pay off, and no people are complaining about being mis-sold...
I sympathise with your situation, but I am convinced that if you look back at the premiums paid (adjusted for the cost of life cover) and roll this up at the return achieved on the funds that you invested in (which funds did you invest in and why?) then you will see that the policy wasn't necessarily that bad value.
It does appear that the salesman didn't do his job properly to earn his commission though...
Sidicks
Poor Salesman? Probably not, given what NM Home Loans paid him every time he sold a policy to a niaive young chap like me
I had no dependants, so if I died, my parents would have sold the house to repay the mortgage, LTV was around 75%. No, I didn't read beyond the front page, and I was not given any choices of policy type, he told me that was what I needed to get a mortgage. The two other endowment policies I subsequently took out were properly explained, but are both much closer to achieving their projected value - I think the NM policy was invested in Japan
I was definitely not taking a gamble, not my style, and I don't believe it was possible to get a mortgage without means to repay it back then. I still find the idea of interest-only mortgages to be crazy, I can't believe it's legal.
Anyway, back to the OP's question, are you suggesting £300/month of which ~10% pays for life cover, invested over 25 years and now worth £68K was a good ROI? I make that around -1.5% annual growth. However, if it's true what I said about most of the money paying for life cover, (e.g. 60% life, 40% invested) then it would be equivalent to ~5% annual growth.
OP, unless you need the life cover, close the policy, you can do better IMO. If you do need the life cover, get some quotes for this on it's own then decide.
I had no dependants, so if I died, my parents would have sold the house to repay the mortgage, LTV was around 75%. No, I didn't read beyond the front page, and I was not given any choices of policy type, he told me that was what I needed to get a mortgage. The two other endowment policies I subsequently took out were properly explained, but are both much closer to achieving their projected value - I think the NM policy was invested in Japan
I was definitely not taking a gamble, not my style, and I don't believe it was possible to get a mortgage without means to repay it back then. I still find the idea of interest-only mortgages to be crazy, I can't believe it's legal.
Anyway, back to the OP's question, are you suggesting £300/month of which ~10% pays for life cover, invested over 25 years and now worth £68K was a good ROI? I make that around -1.5% annual growth. However, if it's true what I said about most of the money paying for life cover, (e.g. 60% life, 40% invested) then it would be equivalent to ~5% annual growth.
OP, unless you need the life cover, close the policy, you can do better IMO. If you do need the life cover, get some quotes for this on it's own then decide.
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