Endowment question

[Nev]

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

[john boyle]

Post by Nev
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 ?

What fund is it investing in?

[Nev]

John,

From the Unit statement all I can get is

Mortgage Endowment Plan
Managed fund series 2

Nev

On Sat, 14 Feb 2004 17:58:25 +0000, john boyle

Post by john boyle

Post by Nev
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 ?

What fund is it investing in?

[john boyle]

Post by Nev
Managed fund series 2

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.

[Stephen Burke]

Post by Nev
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

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.

[John-Smith]

Post by Stephen Burke
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?

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

[Nev]

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




On Mon, 16 Feb 2004 09:42:25 +0000, John-Smith

Post by John-Smith

Post by Stephen Burke
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?

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