1. Home
  2. UK Finance Discussions
  3. Endowment question

Endowment question

Good afternoon,

I have recently been offered compensation for an endowment policy taken out in 1995 to pay off part of my mortgage.

I think I understand the offer. My question relates to what to do next. The company (Woolwich) are offering to reduce my outstanding capital by the surrender value of the endowment plus the compensation worked out as the difference between the position I would have been in if I had been sold a repayment mortgage rather than the endowment (the sum includes the surrender value)

I feel I have an option (having looked at other posts) to accept the compensation paid to my current lender to reduce my capital but keep the endowment as a savings mechanism.

So to my question - in very broad terms is a 1995 unit linked endowment a sensible saving vehicle for the future or would I be better off using the settlement to reduce the mortgage and invest the extra I will have to pay if I keep the endowment into some other savings ?

I hope that all makes some sense?

TIA

Nev

Reply to
Nev
Loading thread data ...

In message , Nev writes

What fund is it investing in?

Reply to
john boyle

John,

From the Unit statement all I can get is

Mortgage Endowment Plan Managed fund series 2

Nev

Reply to
Nev

In message , Nev writes

Thats what I need.

This is a fund which aims to give lower volatility of returns and is in the 'balanced managed' group of funds. Its performance is worse than average for this sector over 1,2,3,4,5,6,7,8, 9 & 10 years.

I dont know what your attitude to investment risk is but if you were starting an equity based savings plan today then I cant see this fund being in the running at all and, of course, being a Life Company fund it pays tax, albeit at only about 17-18%, but it pays it none the less.

Therefore I dont see this as being a good investment, go for a decent fund manager in a non-life wrapper such as an ISA or even a bare UT.

An endowment provides life cover, be aware that if you cancel the endowment you will loose this. If your health has deteriorated or you have had a medical 'event' since you took the policy then you may not be able to get replacement cover at a reasonable rate if at all.

So your plan of action should be

1) decide if you want replacement life cover for the lower mortgage amount, then get some if you want it.

2) surrender the endowment

3) check to see if a wodge of dosh would come in handy.

4) use the policy proceeds to reduce mortgage.

5) convert mortgage to repayment mortgage, try not to extend the period.

6) start monthly contribution equity based ISA NOT form the Woolwich.

Reply to
john boyle

I'm a bit surprised that you have a unit-linked endowment at all other than by your own choice. With unit-linked policies there should be absolutely no doubt that you run a significant risk, even with a managed fund; did they really not explain that to you? The argument for retaining with-profits endowments is that a large part of the gain may be in the terminal bonus, but that isn't relevant for unit-linked, where the surrender value should represent the true value of the policy. As John Boyle says, if you would like to continue with an equity-based investment a better fund in an ISA is probably a better bet.

Reply to
Stephen Burke

A lot of people did get offered "unitised with profits" funds; I saw one the other day... very confusing as to what it means.

Reply to
John-Smith

Thanks very much for taking the time to answer my questions esp John who obviously did a little bit of digging.

I will use the settlement and the compensation to get me back to where I would have been if I had taken a repayment option in the first place. (I was advised (pressured) into taking the endowment)

I will need to arrange some life cover now.

Its refreshing to be able to ask question and get impartial advice,

Take care

Nev

Reply to
Nev

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.