Questions of Cash: Get quotes before cashing in endowments


Q. I took out a Royal & SunAlliance with-profits endowment policy in 1989, which matures in 2014.

Q. I took out a Royal & SunAlliance with-profits endowment policy in 1989, which matures in 2014. The related mortgage is paid off. I now have a repayment mortgage coming to the end of the tie-in period in November when there will be £25,000 outstanding. I have £20,000 on deposit from a windfall earlier this year; a further £20,000 in cash ISAs; and £20,000 in share PEPs and ISAs.

The surrender value of the endowment in 2001 was £5,500 plus bonus of £1,000. Should I surrender or sell my endowment in November, add the proceeds of my windfall and pay-off the whole mortgage, or make overpayments to pay it off? I have no dependents and don't need the life cover.
MH, by e-mail.

A. The general advice has been to avoid surrendering with-profits policies, because of losses incurred through market value adjustments - penalties for early surrender. But the poor terminal bonuses produced by many policies has cast doubt on this approach and you will probably be best served surrendering your policy to pay-off the repayment mortgage.

You should seek quotes for selling the policy, but in current market conditions you may have difficulty obtaining a better price than the surrender value, especially as RSA's is a poorly performing closed fund.

Ray Boulger of Charcol mortgage brokers adds that you should obtain a formal surrender value before you make a final decision and you might consider keeping a mortgage debt of £1 in order to have somewhere to securely keep the house deeds free of charge.

Q. Fifteen years ago, I took out a life policy with Co-operative Insurance Society (CIS), that matures next year. The with-profits sum assured is £17,000: I paid a monthly £100. My annual bonuses has been £7,839, which gives me £24,839 to be paid to me. But the bonus this year is just £112, which is interest on my investment of half a per cent. Is CIS going out of business? Should I cash it in and risk losing a penalty, in order to protect my investment?
DS, Romsey.

A. With-profits investments produce "smoothed" returns - the highs and lows are evened out. During the years when the stock market was performing badly, the capital value of your investment was protected. In this context, the bonuses produced by your policy were not that bad.

You do not need to be concerned about solvency. CIS is a subsidiary of the Co-operative Group, a large and profitable retailer. If you cash-in your endowment a market-value adjustment would not be imposed because of the type of policy you took out. However, you would lose the terminal bonus.

While there is no guarantee that any terminal bonus will be paid on your policy, the terminal bonus this year was 15 per cent and by surrendering it you risk losing a significant sum and we would advise against this course of action.

Q. I am worried about the long-term viability of my occupational pension, given the publicity about pension shortfalls. Should I switch from my occupational pension to a personal pension to lock-in the current pension value? I have been a member of the pension scheme for 36 years, which offers 40/60ths of final salary and I do not expect to change employer before retirement.
RA, by e-mail.

A. Carl Melvin, a pension adviser at Pension Transfer Solutions, says: "It is generally a bad idea for an active member of a final salary pension to opt out and transfer benefits." You should first contact the trustees of your employer's scheme, obtain the latest pension scheme report and valuation to see if the scheme has a deficit, how much it is and what the company will do to rectify the shortfall.

You should then talk to a union or personnel representative, to seek an assurance that the scheme is financially sound. But as it is a company scheme, the solvency of the employer is actually more significant than that of the scheme. The risk attached to an occupational pension scheme from an employer insolvency will lessen once the personal protection fund is established, and the Pensions Bill that will create this is currently going through Parliament.

Q. Our daughter is going to a boarding school in Denmark and we will pay her fees on a monthly basis. We will also transfer pocket money. What is the best and cheapest way of transferring money abroad?
LG, by e-mail.

A. One option would be to open a bank account in Denmark to pay the fees. Your daughter's school may be willing to pay her the money on your behalf.

Denmark is outside the eurozone, but the euro is widely accepted and independent schools usually accept payment in euro. So an alternative would be to open a euro account. This would enable you to make cash withdrawals anywhere within the eurozone without paying the exchange costs.

Do not open a euro account in the UK as you will still have to pay transaction charges. It may be easiest in the Irish Republic, but you may have to open the account in person to satisfy money laundering regulatory requirements.

* If you have questions, write to Questions of Cash, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk. We can reply only to letters published. Please send copies, not originals.

Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
TV
Voices
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Sport
Steve Bruce and Gus Poyet clash
football
News
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
TV
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths
Life and Style
life
Sport
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
News
Amazon misled consumers about subscription fees, the ASA has ruled
news
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Austen Lloyd: Law Costs HOD - Southampton

    £50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

    SThree: Recruitment Resourcer

    £20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn