Andy McCord

OK, there must be 1 or 2 others out there in this u-boat, currently have a endowment with winterthur life that has been running for 11 years, now ive just moved house recently & taken out a full 25 year mortgage & in the process moved to full repayment, now ive had letters already saying the shortfall will be £9K, but as ive said im now on repayment, should i carry on with the endowment as an investment or cash it in?

Cheers
Andy

TelBoy

The price of the correct answer to this question must be very high indeed!

What i would say though, is that you're asking at a time when stock markets have been particularly badly hit, so the obvious reaction at the moment is to think about cashing them in.

The economy will probably get worse before it gets better, so there might be more pain on the horizon. But this might still be less than the cost you'll incur from cashing in the policy, so personally, i'd hold on to it and keep investing.

At least, that's what i'm doing!!

Andy McCord

yeah thats what ive been thinking, currently paying £58 a month and final projection is to pay out £25K, but i will have paid in nearly £18K to get that back, im sure i could do better with some other type off investment but which one??

Tiggs

assuming it was a 25 yr term you have 14 yrs left- the projections you have are not what it will or wont do, they are "guesses".

you will have the shortfall shown if the actual growth over the next 14 yrs (long time) is 6% (or whatever fig you were looking at) so do you think 6% is likley?

it also depends on whether your plan is a withprofit or unitlinked fund as the "cost" of stopping and starting afresh will be different with both (cost as in longterm impact- not actual cost to stop)

ohh, watch out for an MVA if it is withprofit cause then there really is a cost!

so there you go, no really help at all- typical finacial adviser

jasey

One for you to decide - I have been in similair positions before and have always cashed in ! The charges on these things are only beaten by personal pensions (but you cant cash them in ). 11 years is nearly half way.

£58 per month for 25 years at 3% per annum would give you £26,137 (ignoring tax etc - and assuming my spreadsheet hasn't got errors ) - so the endowment you have would appear to be pants (like most of them) - I would get out of it and put it somewhere else - speak to a financial advisor !!

Jase

Chrisgr31

My endowment is with Winterthur Life as well. I have had it for 11 years and it is going to miss its target. However getting married later this years means I will be moving soon. Therefore what do I do with the endowment.

So far it is just about worth the amount of money I have put in. I will be keeping it up. Effectively its a gamble, might get oit wrong might get it right. However over the next 14 years the Stock Market might stage a major recovery and I wouldn't hyalf be upset if I missed the boat!

Avril

I was thinking about cashing mine in too, but with the state of the markets at the moment the obvious reaction is to panic. But the 'upside' is that because the market's pants, my money's buying more units than was expected. So if things pick up, even a little bit, the rewards with be worth it.

There's no safe answer to this in the absence of a crystal ball

Avs

[Edited by Avril - 2/27/2003 9:30:05 AM]

paul w

Did the same a few years ago,it was worth the same as i'd put in after 10 years,cashed it in,played the stock market and doubled the value in less than a year then put it down as a deposit on a buy to let and now have an income for life.

You can simply stop paying in and leave it to grow or not if it's crap,remember everytime you chuck your £58 in there are fees coming out before units are bought.

Have a search for unit trusts and see whats about and how yours is performing,some of the newer funds give good results as they can be very active but you need to keep your eye on them and maybe swap after a few years,did this a few years ago with our peps and doubled our money in 3 years then got most of it out and now they're worth FA so you have to watch them.

Try selling it to company if its with profits,you may geta better price.


Cheers Paul

jbryant

I just cashed in my Standard Life endowment a few weeks back. Got a letter a few days later to say they had just cut the margins again so I got in just in time by thge sounds of things. Looked into the figures and if I pay what they give me into my mortgage, I'll save 10's of 000's in long term

My expectation was the stock market value would sink further in the short term so I just cut my losses and run.

The charges were horrific when you checked into how much you paid over the full 25 years and the simple interest that you could accrue.

Best thing was when I rang up to ask the value - I would apparently get a bonus at expiry date in 18 years time "if they had funds availble." Like I'd be banking on that one then when my shortfall is already over £10k on a generous Stock Market expectation over the next 18 years...

Cheers
Joolz

Timbo330

More Muppets!!!

If endowments are such bad value, why do you think there are big companies making big money buying the fecking things??? (DUHHHHH)

If you hava a with profit endowment with a reputable company (Standard Life, Friends Provident, Norwich Union, Legal & General etc..) then chances are it will pay out way over your mortgage amount, depending on how recently you took it out.

As Tiggs said in his post, the FSA projections are at 6% p.a. Even with the current depressed markets, 25 year endowments maturing today are probably returning 11% p.a. including terminal bonus which the FSA pretty much ignore.

It's likely that it will take 7-8 years for the money you get back to match what you've already spent so my advice: stick with it. If you're really scared it'll fall short then save some extra into an ISA or change some or all of your mortgage over to a repayment basis.

better advice: consult an Independent Financial Adviser rather than a bunch of blokes who spend £20,000 on car improvements!!

fast bloke

I take it you are not an IFA then Timbo? A 25 year with profits policy maturing today will have had 22 years of good reversionary bonuses added up until 2000. These bonuses have been cut considerably over the past three years, but bonuses already added cannot be taken away. The terminal bonus is a percentage of all the other bonuses. The annual bonuses have been set too high in the past, which is the reason for so many 'bonuses slashed' headlines. Even if the markets recover substantially, the insurance companies will be considerably more cautious when adding annual bonuses in the future.
The companies that are buying with profit endowments are looking for policies that have at least 15 years gone. They are prepared to take the risk that they will pay out at the end of the term. If you are happy to take the risk that your mortgage will be paid at the end of the term then stick with the endowment. However, the only way to guarantee that your mortgage is paid is to go for a repayment. If you decide to do this you will need to pay more on a monthly basis. Not everyone can afford the luxury of running an endowment plan and a repayment mortgage side by side for the next number of years. Every case is individual and should be treated as such. Sweeping generalisations with the implication that you are an IFA are not helpful to someone trying to make a decision wich could cost thousands of pounds. I would agree that the best advice is to consult a financial advisor, but do it in person so they can take all your circumstances into consideration instead of one line answers on a bulletin board

Andy McCord

Thanks guys 4 the replies, i guess im lucky in the fact that i can keep my endowment going & have already moved to full repayment, the last thing i was going to do was increase contributions to these companies as having failed once!! its gunna happen again, Now our company is getting stuck into us to remove final salary pension scheme, better not go there

jasey

Timbo - the company providing the endowment are currently predicting a return of less than 3% PA (not 11%). I'd rather put £58 on a good horse each month rather than wait 25 years to get back £25k having put in £17.4k

Tiggs

there are the figures achived so far (11% for many companies based on 25 yr plans), there are the predictions by the companies for future growth (figs set by the FSA not the firm) these are guesses, there are the figs that will be achived in the future...who knows.

camk

Your gubbed now anyway, it can go lower but unless the **** collapses totally from the financial world its certainly near the bottom now. The one positive point is that your getting the units cheaper and any rebound in the next 4-5 years will be more profitable. BTW I'm in a similar position where I've 2 25 year endowment's for 50 and 90K on the go for another 10 and 15 years respectively. I'm currently renting as I'm living abroad.
I could probably get back most of what I put in but I don't need the cash and where else would I invest in, in Gold and Bonds , thats as big a bubble as property is in the UK.
To those who think that Property is the lifelong answer , its certainly not as guaranteed as you think. Just because loads of people have made a mint in the last 10 years doesn't men it will continue. What goes up must come down, that goes for house prices and the stockmarket.

Cheers
Cammy
The bottom line is diversity will ensure a safer investment strategy, however risk and reward go hand in hand.

Chrisgr31

Its all very well investing in property but the last property crash was not that long ago, and property crashes are cyclical.

As long as you are in it for the long term and there is no danger of having to sell at the bottom of the market, then Property can be a very effective method of investment. But then the same applies to the Stock Market.

An endowment is effectvely a gamble, and the interest rates being quoted at present are those the FSA tell the companies they have to use. Don't foget that if the property market increases as it has (although is this unlikely?) then by the end of your mortgage the amount outstanding will be a small proportion of the value.

Anyones decision has to be made based on their attitudes to investment, their needs, and whether they want to take the risk. No one (including a FSA) can give you the answer, only advice. Or of course what they are doing themselves.

zax

I also have a Winterthur life endowment, took it out around 8 years ago and was told a good while back that it may not pay off the mortgage when it matures. In the meantime I left the country and became mortgage-free, so that's irrelevant now and essentially it's just a 60 quid a month savings plan. I suspect it's probably not a very good one either, but I've no idea what to do with it. Don't need the money so I'm happy for it to stay somewhere for a rainy day, it seems that stopping payments and just leaving it alone would be the best plan?

Chrisgr31

I don't know whether Winterthur Life is a good endowment or not. I have one, they never appear on the lists of how companies are performing good or bad, so I assummed I was the only person with them So in a way its nice to see other people with them.

I think that they are actually owned by a big Swiss company, could it be Swiss Re? Whether that helps is anyones guess after all SwissAir didn't do very well.

Any information on tables that include Winterthur Life and show their performance would be helpful.

Andy McCord

Yeah agree chris, i can never find them in the performance charts maybe they dont even get on the bottom off the list M8 I think at the time i took it out it was with provident life IIRC who then got bought out, I wished id kept all the documents promising me early payoff my mortgage & nice nest egg then i might off stood a chance off getting my money back, but as usual chucked them away or lost them

Chrisgr31

Well Andy thats what I thought, but them found the documentation and in the small print it did say figures are not guaranteed!

As regards the bottom I try and console myself with the thought they normally show the bottom and top so they must be in the middle. Probably near the bottom!

Only snag is why is Bravo2Zero leaving them?

Timbo330

Fast Bloke,

I am an IFA though I didn't want to blag on about it in case I incurred the moderator's wrath for advertising on the board....

All the points you raise are valid, though I don't share your pessimism about the future performance of with profit endowments.

Before becoming an IFA I was a tied agent of Friends Provident, a very respectable with profits Life Office, though by no means one of the best performers. We had people with £50,000 endowments maturing at £170,000+ and it is inconceivable that the current trends would be continued to such an extent that performance over 25 years would be cut by 75% to mature at less than the mortgage amount.

You correctly say that bonuses have been overpaid in recent years by many life offices - Equitable Life would be a good example. However, the whole point of a with profits investment is to smooth out fluctuations in the equity markets - the life office takes the risk not the client.

Given that we are at the bottom of a 3 year bear market the current low bonus rates should give way to higher rates again once the markets recover. I therefore stand by my belief that anyone who cashes in their endowment and converts fully to a repayment mortgage is throwing good money after bad.

At the very worst, they should make it paid up if they want to convert to repayment basis.

The important thing is to get individual advice and to review it on a regular basis rather than rather than talk to 'bloke-down-the-Pub' or 'Trusted Scoobynetter' (Unless 'Trusted Scoobynetter is an IFA.....)