The Mortgage Clinic: 'Should we cash in our endowment policy?'


'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 mortgageclinic@independent.co.uk. 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

PROMOTED VIDEO
Arts and Entertainment
Dwayne 'The Rock' Johnson stars in Hercules
filmReview: The Rock is a muscular Davy Crockett in this preposterous film, says Geoffrey Macnab
News
i100
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Sport
Louis van Gaal watches over Nani
transfers
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
Sport
New Real Madrid signing James Rodríguez with club president Florentino Perez
transfersColombian World Cup star completes £63m move to Spain
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Travel
Hotel Tour d’Auvergne in Paris launches pay-what-you-want
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
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

    Business Analyst - Banking - Scotland - £380-£480

    £380 - £480 per day: Orgtel: Business Analyst - Banking - Edinburgh - £380 - ...

    Risk Analyst - (Multi Asset class) £70k - £80k

    £70000 - £80000 per annum: Harrington Starr: My client is a leading financial ...

    Programme Director - Conduct Risk - London

    £850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

    Application Support Engineer (Windows Server, Networking, Perl)

    Negotiable: Harrington Starr: Application Support Engineer (Windows Server, Ne...

    Day In a Page

    Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

    Noel Fielding's 'Luxury Comedy'

    A land of the outright bizarre
    What are the worst 'Word Crimes'?

    What are the worst 'Word Crimes'?

    ‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
    Can Secret Cinema sell 80,000 'Back to the Future' tickets?

    The worst kept secret in cinema

    A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
    Facebook: The new hatched, matched and dispatched

    The new hatched, matched and dispatched

    Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
    Why do we have blood types?

    Are you my type?

    All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
    Honesty box hotels: You decide how much you pay

    Honesty box hotels

    Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
    Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

    Michael Jamieson: Why weight of pressure rests easy on his shoulders

    The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
    Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

    The 'scroungers’ fight back

    The welfare claimants battling to alter stereotypes
    Amazing video shows Nasa 'flame extinguishment experiment' in action

    Fireballs in space

    Amazing video shows Nasa's 'flame extinguishment experiment' in action
    A Bible for billionaires

    A Bible for billionaires

    Find out why America's richest men are reading John Brookes
    Paranoid parenting is on the rise - and our children are suffering because of it

    Paranoid parenting is on the rise

    And our children are suffering because of it
    For sale: Island where the Magna Carta was sealed

    Magna Carta Island goes on sale

    Yours for a cool £4m
    Phone hacking scandal special report: The slide into crime at the 'News of the World'

    The hacker's tale: the slide into crime at the 'News of the World'

    Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
    We flinch, but there are degrees of paedophilia

    We flinch, but there are degrees of paedophilia

    Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
    The truth about conspiracy theories is that some require considering

    The truth about conspiracy theories is that some require considering

    For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn