I was hoping experienced members could provide advice on a quandary. I have held an endowment policy since 1988, which is due to mature in 2013. Given that rocky times appear to be ahead, I am not sure whether to sell it on or to keep it going.

If there is a recession due to a HPC, and I think that is pretty obviously going to happen, then surely it is even less likely that the policy will hit its target growth by 2013.

On the other hand, would it provide my savings some protection against inflation, which would be a further issue if oil prices stay high for many years, or even go higher (and they might!)?

Any comments appreciated.

I understand it is a bad idea to surrender an endowment policy back to the company, as you get more by trading it in to an endowment broker.

Malco a couple of things here. Firstly if your endowment was used as the repayment vehicle on a mortgage you should refer to the selling agent and question the advice you received (don't take this the wrong way but if you are asking questions in a public forum 17 years down the line there is a good chance it wasnt explained properly and could have been mis-sold. Also, don't forget your endowment also gives you life assurance - not all your premium is invested a not insignificant amount pays for a built in decreasing term assurance policy. If you don't need that cover anymore then that's an important consideration.

Presumably you are in a with profits fund, and aware that bonuses to which have fallen considerably since 1988. The terminal bonus on maturity may also disappoint and leave you well short of the original target amount. Look at the predicted maturity value that your company would have sent to you over the last few years and base your decisions on that.

In summary then financially you would be better off if you complained and received compensation if you were badly advised, whether to retain or sell is not purely down to the investment returns - but if it was I suggest £better to trade it in a TEP than to surrender to the provider. Who knows what will happen to bonuses in the next few years but remember they may get worse not better.

But remember the life cover aspect - find out how much it would cost you to replace this now and the effect on your dependents if you were to cancell it, but you can always replace this with a pure term assurance policy if needs be.

NEVER EVER sell/surrender an endowment if you can afford to keep it to maturity. NEVER.

Why exactly?

Returns will be crap

You can get cheap stand alone life cover

you can get an uplift sometimes if you sell it.

You can complain about the original sale but that is another issue.

I don't believe you will get "crap" returns. Bonus rates from life offices have followed the path of interest rates. If you think interest rates will rise, then so will the annual bonuses on your policy. I do not know this for sure, it is from watching what happened from within the TEP industry.


There is no investment element in life cover. The life cover on an endowment is much cheaper when you see what proportion of the premium is not invested to give you a return.


Uplift on what? I worked for a TEP market maker for 6 years The market only exists because the Life Offices penalise you (rip you off) if you cash in early years. Selling your policy will typically get you between 5-7% above surrender value, IF it is a marketable policy (maturing soon). This is so the market maker can add on some profit, commission etc and sell to someone who will take it to maturity.
You will always get the best return on an endowment by keeping it to maturity. As to whether you could surrender it, and use the cash and future premiums to buy a better investment which will outperform your low risk endowment - only you know that.
If you need cash, you can always borrow from the endowment provider (up to 80% of surrender) at very reasonable rates. Why not consider investing that money instead? I know investors who geared their TEP portfolio (borrowed against policies to buy more, to borrow again, to buy more etc) to achieve year on year returns in excess of 20%.



Endowments only 'underperform' when advisors sell them to clients on the basis that they achieve the very maximum possible expected. When interest rates were 15%, policies were projected forward as if they would achieve 15% this over 25 years. When the endowments achieve a more realistic 9%, they don't cover the mortgage. This misselling has given the product a bad name.
For the average person, an endowment can be an excellent LOW RISK LONG TERM product. I am thinking of buying a good traded policy (to mature in 4 years) whilst i ride out the hpc storm.

With asset allocations of some 40% equities, 40% bonds and the rest comm prop and cash - as I said the returns will be crap.

If you can sell it you probably should as the returns will be crap.. Why save into a crap policy?

Of course there are always exceptions

If returns are that bad, why are people so keen to buy on the open market and at prices over and above the providers redemption figure. Think about it!

they are keen because they are buying at a discount - because of the early surrender penalties - would they be buying were it not for this discount - i think not.

if you are going to sell you have got to think about what the likely returns are for you to continue with the policy compared against the cost of life cover, and investing the proceeds in something else and the likeley returns of that.



If your endowment is invested as above - I would be worried about its likely returns given the state of the economy.



what's the usual charges as a percentage of the fund in these endowment policies

Unsure LRYMS if you're playing devil's advocate and that's the point. With with profits - you simply don't know. The insurance company decides what it wants to charge and keeps it implicit.

2 to 3% would be about right probably.

you should be sure