Endowment - Surrender, pay up or continue?

Question

Hi guys, I'm after some advice.

Due to the poor performance of my endowment (L&G policy and compensation claim already sorted!), I now want to look at whether it's worthwhile keeping, making it a "paid up" policy or surrendering it. It's maturity date is January 2012 and it's currently worth about 18k as a surrender value. I have already contacted AAP who initially offered about 1k more, but a more up to date quote now states they cannot match the surrender value. This has me really worried. So, should I keep it going (assumed figures are 42k at 8%, 38k at 6% and 34k at 4%)? I am also aware that these don't include any future bonuses, including a terminal bonus, but they can't be guaranteed anyway and knowing L&G they'll probably be withdrawn prior to my maturity date!). Any advise would be welcome.

john boyle · Accepted Answer

In message , Ian writes

I assume it is a 'with profit' endowment otherwise AAP wouldnt have quoted at all. Those projections mean nothing and are irrelevant. So long as you can get replacement life cover (if you need it) then surrender it.

JethroUK · Answer

endowment policies accrue faster/more in the latter half of the period than they do in the former half - hence why companies like to buy these (even under-performers) after you have already paid the lions share of the interest - you might also consider that your monthly payments includes a life policy and you might want to figure out how much that would cost you to replace (what it is worth to you)

Clifford Frisby · Answer

Ian, I don't whether I am misreading what you have written, and apologies if I am, but those projections *do* include future annual bonuses, and, almost certainly, any terminal bonus.

In fact, it's only those future bonuses, and nothing else, that can raise the guaranteed maturity value from today's figure up to those projections, isn't it?

Matt Robertson · Answer

1.  Find out the current annual bonuses applied to the sum assure and bonuses and project this forward to the maturity date using a compound calculator 2.  Find out the revised sum assured and bonuses, what the paid up annual bonuses are and project these forward using a compound calculator 3.  Find out the cost of replacement protection (critical illness and/or life cover), the current surrender value and the amount of premiums that you need to pay up to maturity When you are armed with the above, it should hopefully be a straight forward decision. Regards, Matt.

Endowment - Surrender, pay up or continue?

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