The Mortgage Clinic: 'Should we cash in our endowment policy?'
Wednesday 23 July 2008
'We took out a 25-year interest-only mortgage in 1987, along with a Standard Life endowment, but we no longer need the endowment to pay off the mortgage nor the life insurance aspect of the endowment policy. Should we carry on paying £42 a month for this policy until it matures in 2012, or should we cash it in now?' Sally Jenkins, Sutton Coldfield
Endowment has been a dirty word since the mis-selling scandal that began when commission-hungry salesmen promised home loan "windfalls" that never materialised. So it's a great relief to hear that you've escaped a mortgage shortfall via these notorious policies, which invested in the stock markets in a bid to pay off a home loan, and can now choose how to dispose of such a discredited product.
But while it might feel like a triumph to cash it in immediately, there's a case for keeping it as a savings policy until maturity. "As you bought the endowment policy in 1987, it's likely to be a 'with-profits' policy – these pick up annual bonuses and may also give a 'terminal' bonus, too," says Ray Boulger of broker John Charcol.
According to Andrew Montlake, of Cobalt Capital, with-profits policies, although contentious, can "grow much faster over the end stages, dependent on underlying investment trends".
So, over the next four years, you could pick up a thousands of pounds in line with the Standard Life endowment fund's performance – depending on the size of your policy, of course.
David Hollingworth, of London & Country, says the problem is that "it's impossible to know how the policy will do" and with the state of the stock market today, it's a gamble that only you can decide to take.
Melanie Bien, of Savills Private Finance, points out that "equities are in a bear market and it looks as though this could be the case for at least a couple of years".
You should receive a projection letter about the fund's performance every two years but to check on it now, write to or call Standard Life and request an update. The alternative is to cash it in now, and save yourself the £42 a month. But don't just surrender the policy to Standard Life, says Hollingworth: "It's worth exploring the second-hand policy market where a with-profits policy can be sold, often for more than the cashing in value."
You could try a company such as AAP ( www.aap.co.uk), which claims to offer up to 35 per cent more than life companies on some policies. Although you say you no longer need the life insurance (sold with all such endowments), make sure you've got enough to cover you and or your family; if you haven't, it could be a lot more expensive than 21 years ago.
Send us your questions and you could receive £50 to spend at Amazon
Foxed by jargon? Worried by the credit crunch? Email a question to firstname.lastname@example.org. We will not reveal your identity, and we cannot give specific advice. If your question is printed, you'll receive a £50 voucher from Amazon.co.uk, so you can kit out your home with anything from a lawnmower to an espresso machine. www.amazon.co.uk/homeandgarden
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
Diving in at the deep end is no excuse for shirking the style stakes
Consumers given power to choose a green deal
'Scrap the trap': calls for change grow as banks are told to play fair with loyal savers
Bargain Hunter: Eurostar offers child fares for £1 each way to Paris, Brussels and Lille
Relaxed pensions rules: Guide to what they mean to you
Moment of truth for payday lenders: Watchdog plans to curb cost of short-term loans
- 1 Why I'm on the brink of burning my Israeli passport
- 2 Comfortable in their own skin
- 3 Japanese plant experts produce 10,000 lettuce heads a day in LED-lit indoor farm
- 4 War is war: Why I stand with Israel
- 5 L'Oreal cuts ties with Belgium supporter Axelle Despiegelaere after hunting trip photographs
Sustained immigration has not harmed Britons' employment, say government advisers
War is war: Why I stand with Israel
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Australia facing international condemnation after turning around Sri Lankans at sea
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
iJobs Money & Business
£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...
£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...
£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...
£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...
Day In a Page
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square