Monday, November 07, 2005

Bloomin' endowments

Like so many others during the 1980-90s me and the dp were pushed into buying endowments to pay off the mortgage. We were assured that these policies would mature and pay off the mortgage, with perhaps a surplus. But no, they now seem to be underperforming to the tune of £12,000 in our case. Fortunately, the last time we moved, I was so dubious that I insisted on part endowment and part normal repayment. The latter is initially more expensive, but at least we know how much we're paying off. I seem to have the instinct about financial stuff; if I'd been the only one in the room, I would have come out with a full repayment mortgage. It must be my background of close-to-the bone finances when I was a child. Though I can't add up for toffees!

Some friends of ours in a very similar 'endowment' position have recently consulted a financial advisor who has suggested that they surrender their endowments. They need to bump up their repayments to the tune of what they were paying monthly in the endowment, but due to cashing the endowment in, they will pay-off their mortgage three years earlier!

Though now thoroughly distrustful of anyone who wants to get hold of our funds, I must confess to being interested in this. But is the financial advisor's advice good? To this end, I've put a question to Money Saving Expert website forum. It's a website that Diane recommended, and has been helpful on other occasions too. Regarding the current question, I've already discovered that Standard Life will probably be demutualised in 2006 (though see this). What this means, I don't really know, but since we have a policy with Standard Life, apparently we stand to get a payout. So we're not to cash in that endowment until after that happens. We also have another endowment with another company, but I don't think there's anything stopping us from surrendering that ASAP. By the time we've worked it all out, I daresay it'll be well into 2006 anyway.

And just don't get me started on the question of pensions! The government in the 1980s encouraged contracting out of the state earnings related pension (SERPS), but now we're being told to contract back in again. Someone's benefitted from all this, but it's not those of us with average or lower pay, that's for sure


At 12:52 pm GMT, Blogger Diane said...

The MSE site is excellent for anyone wanting to make the most of the cash. Best of all, it's free. I'm glad you found it to be of use.


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