Endowments policy.

[ummmm]

Got a letter yesterday regarding (his) endowment policy stating that it is forecasted to be 16k short.

The mortgage is for 47k.

What would be the best options? Should we cash it in now, remortgage and go re payment. Or go repayment and keep it the endowment until it matures?

It's 15 years old now so has another 10 years to run. We also got info saying that he might have been mis sold the policy.

[sara3]

ummmm, I was in a similar situation a few years ago. I just thought if I had the suggested shortfall at the end of the mortgage (poss £23k) I'd be devastated. I cashed the endowment and re-mortgaged for my peace of mind.

my endowment was a "with profits" policy, so I was a bit stuffed re selling it on.

vibra's points are more important than my opinion, btw!

[S_C]

never surrender an endowment without checking as they can be sold and usualy fetch much more than the surrender value

http://www.which.co.u...ment-policy/index.jsp

this site was found by searching on google and would seem to answer your questions regarding possible mis-sold endowment

i would advise the best course of action would be to seek the advice of an independant fincial advisor.
hope this helps

[buildersmate]

The policy and the mortgage are entirely separate so there is no reason to remortgage for this reason alone.
What many people do (and indeed what I did) was to up the mortgage repayments such that the capital outstanding reduces over the next 10 years to the figure that the endowment policy is projected to be valued at after another 10 years. That way it will then pay off the loan at the end of the mortgage period.
Whether the policy is worth cashing in depends on its cash-in value and we can't really provide you financial advice of that nature here - nor do we have enough information to do so.
Mis-selling is a separate issue that you can pursue anyway - though I had believed that most cases had been processed and certain deadlines for registering claims have long since passed.

[ummmm]

Besides all the jargon this is what the main letter says....

Start date - Jan 96
Maturity Date - Jan 21
Target amount - £47,200

And what your plan might provide at maturity....

Growing at 4.00% - Projected Final Amount - £30,900
Growing at 6.00% - £36,800
Growing at 8.00% - £43,900

He's been paying £78.41 monthly. I presume since he took it out. The policy is with Winterthur Life and his mortgage is with The Halifax.

[ummmm]

I really need to learn how to type faster....

[sara3]

fair point.. I re-mortgaged as I'd just got divorced also. it was quite a busy time!

[ummmm]

Thanks everyone...

Builder...I was thinking it might be better to change to re payment and pay extra off each month. Also he only got the letter yesterday and it had information about the policy being mis sold.

[buildersmate]

I'm afraid that an IFA needs to work these 3 different options out for you.
You are probably right - when I did this, it was 10 years ago and interest rates and average expected returns on endowment policies were different.

[ummmm]

I think he has just decided to keep the policy.

Now he just has to decide if he wants to switch his mortgage.

[R1Geezer]

Let the policy run to maturity, in 10 years time may not be as bad. At the same over pay your mortgage so you reduce the amount.

[ummmm]

So we don't have to switch to a re payment mortgage to do that?

[ummmm]

Good thinking batman....

I will mention that to him when he gets home....

[ummmm]

Cheers for that Vibra xx

[Kathyan]

We had the same problem a couple of years ago. We tried for the mis-sold, no joy. So we changed to repayment mortgage and the payments have not changed much. We are letting the policy run and when it pays out we will pay this off the mortgage.

[tamborine]

leave it unless you're desperate for the money. Dont pay up the mortgage as you get tax allowance/rebate from IR.

[ummmm]

Cheers Tambo....No we're luckily not desperate for money (thank god) Don't tell them in S&R I said that :-)