Standard Life; Endowment Crisis and de mutualisation.

Hiya All.

I am in year 18 of a 19 year endowment mortgage.

Value of Endowment life cover with Standard Life is 31030.

Current actual value at 3/6/06 is 21907

Maturing values at June 2007 advised by SL are; @3.75% 23800 @5.5% 24200 @7.25% 24600

Value of Mortgage (with Nationwide) is currently 27604

Since realised in March I have obtained addmission of mis selling and compensation of 3402, which I have agreed and this will be used to reduce balance of mortgage to 24202

I know that amounts are small compared to some other unforunates but age, ill health and need to retire, not to mention the complete disaster SL's greed have made for my dottage make it quite critical for me. I am alien to any form of demutualisation, where the foot soldiers who provide the wealth, they gain a little in short term, but its to the expense of providing for the fat cats profiteering long term. It was traumatic for me to vote for demutualisation :O(

Thousand doller questions are what to do;

1..leave endowment as it is and hope it does not go t*ts down? (Surrennder of policy sounds a no no even to an LSD novice like me)
  1. convert part of morgage to repayment, capital and interest or leave it "as is"?.
  2. Is rate for endowment "very" likely to go below 3.75%?
4.Windfall from demutualisation, leave shares until endowment matures or sell them PDQ?
  1. What generally happens to shares on a demutualisation...immediate and long term? In the twilight zone here I know, but probabilities must have some trends recognised by those "in the know" more than I.

Any advice greatfully recieved to unfuddle an old mans thinking...Thank you.

Reply to
Himself
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Any expected top-up from their "promise" fund?

OK, so on their medium forecast, you'd have a shortfall of £2. I suspect you could live with that.

Critical? £400 if going to the low forecast?

I would. It has only one year left to go. Were it another 10, 15, or more years, that would be different. In fact, my 25-year endowment matures in 12 years, and I'll need to give some serious thought soonish to whether to cash it in, make it paid-up, or keep it going.

I don't see what how experienced a drug user you are has to do with this. What (else) is LSD?

If you cashed it it now, for 21907, that would leave you 2295 to find between now and next year. But you could pay the money straight off your loan, thus saving yourself a lot of interest to pay your lender.

With only one year to run, there's probably little point in converting to C&I now, but if you have savings you could make a lump sum repayment, and (provided your lender credits this immediately) it will save you a year's interest on what ever you pay off. That's bound to be more than you could earn on it (especially after tax).

Probably not. And isn't there some kind of anti-volatility protection built in to endowments, so that your 21907 won't go down much if the market goes down?

Half and half?

Reply to
Ronald Raygun

In message , Himself writes

Wait until you get your shares then surrender and reduce mortgage

NO, it is almost certainly the best thing to do (after demutualisation), thinmk of all the interest you will save.

Well there is only a year to go but you will only have £2295 outstanding which you could pay off by continuing to make the same monthly payment as you are now plus the amount saved n the endowment.

It isnt 'very' likely its a dead cert. It is only doing 1 - 2% now, and dont forget that isnt 1 - 2% of the current value but a percentage of the 'basic sum assured' plus bonuses to date.

Cant say yet, it will depend on the price and market conditions at the time.

There is no set pattern, some do well,others dont.

The only snag with surrender now is the loss of the life cover of £9396. You mention ill health. If you cancel the policy you will lose that cover and you may not be able to get a reasonably priced replacement life policy, if you have the need for such cover.

Reply to
John Boyle

Young Ronald, LSD = pounds, shillings and pence.

Reply to
Stickems.

Take my scenario: I no longer have a mortage, but I kept the SL endowment policy running. It has a shortfall of about £6,000. I currently pay just under £24 a month to keep it going. It matures in fives years' time. I have also toyed with surrendering it. What's your recommendation?

MM

Reply to
MM

So, remove that snag, as with me, who has no dependants, and it looks like surrender is the best option. Agreed?

MM

Reply to
MM

If someone gave you the cash amount from demutualisation would you go out and buy SL shares ???

If yes - keep them. If not - sell them.

Whats happens to the shares ? If anyone really knew the answer to that......

IMO - After the first few hours / couple of days they are unlikely to move much (unless the whole market moves) In the long term, they will probably grow at a moderate (but not very exciting) rate. (But I might be wrong).

Reply to
Miss L. Toe

Selling is usually a better option than surrendering - though with only a year to go that might not apply to you

Reply to
dtren

"John Boyle" wrote

What about terminal bonuses?

Reply to
Tim

If you no longer have a mortgage, the shortfall won't bother you. I'm in the same position, by the way. We no longer need to worry what alternative sources of funds to identify in order to pay off the loan.

So for us it boils down simply to maximising the return from the investment which the endowment represents. If we cash it in or make it paid up, we lose the benefit of the "promise", but that introduces an unwelcome unknown into the equation because that benefit is no longer easily quantifiable, because they have "reneged" on it (but not quite). They've pulled a fast one by saying the promise had strings attached, some of which have become snagged. However, as thing stand, I understand this means the promise has simply become less valuable, not completely worthless. They will still make up a fraction of the shortfall relative to the original target, but they won't commit themselves to how big a fraction.

That apart, we're left with an unknown growth curve, and we apply that to the sum in the fund now, plus the remaining monthly contributions (less the insurance element). Could we achieve better growth elsewhere? Even if we could, would the loss of benefit from the promise cancel that out? This is the decider between making it paid up or not, assuming we don't surrender.

The decider whether to surrender or not is how much better growth we could get on the surrender value (and on future premiums) but taking into account the surrender penalty (in the form of losing out on terminal bonuses which are conditional on keeping the policy going to the bitter end, and which themselves may depend on whether you make it paid up or not). All these factors are not accurately quantifiable. So we have nothing to go on[*].

It's further complicated because we might not be particularly interested in maximising the resulting sum in 5 or 12 years' time, but we might prefer just to spend the surrender value now.

Well, so much for the long answer. The short one is "I don't know". :-)

Reply to
Ronald Raygun

In message , MM writes

Agreed.

Reply to
John Boyle

In message , Tim writes

SL includes pro rata terminal bonuses in the surrender value.

Reply to
John Boyle

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