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EmpiricalBear

Good Time To Sell An Endowment

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I've had a small endowment policy taken out yonks ago and haven't really looked at its performance for the past three years.

I'd guessed that because the FTSE rose from around 3500 to 6500 over that period that with profits funds ought to have done pretty bl**dy well over that time span.

How wrong I was. Somehow this life company managed to reduce the projected final value from about 25k to 18k over that timespan. Even for the pension industry, I think this is really poor investment performance.

Anyhow, with all this credit marked kerfuffle building up, it made me wonder if the company concerned had investments in this MBS rubbish so I looked into it. Turns out that in this period of storming equity returns they were less than 50% in equities and had about 40% in fixed income. Their website gave no more information that this so I wrote to them asking for a more detailed split of their fixed income investments.

To cut a long story short there was a substantial amount in 'corporate bonds' but they wouldn't go any further than that. I can't see why they wouldn't be more transparent if they didn't have something to hide.

So I sold out. With four years and another couple of grand to invest before the final termination I decided that I could invest the money as wisely as they can in an ISA wrapper. The price I got preceded the start of this credit market rout, no idea whether it would have been affected by it though.

I haven't got the cheque in my hand yet, and I've started to wonder if the company buying the endowment might themselves chicken out of the deal.

Anyhow... just thought it was worth floating the observation that these life/endowment companies could be up to their neck in subprime derived paper and no one would know about it. And I can't believe that they missed out on the equity bonanza from 2003-2007, that ranks as a massive missed opportunity thats forgivable in a small investor but not from so called 'professionals'

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Guest muttley

I looked at doing this a couple of months ago. I've got 5 years to go on an endowment I took out on my first house. The surrender value was 11.5k with a projected 18k , but what made me keep it was that there is a guarenteed 15.5k at the end of the term. As I have already paid off the mortgage and I am maxed out on ISAs I figured I'd leave it be.

I reckon there will be a clamour to sell endowments in the next few years.

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Guest Charlie The Tramp

I must admit I was lucky with Life Endowments taken out in 1970, 1976, and 1980. Each £25 per month invested produced £40k on maturity over 25 and 30 years although some suffered a drop in the last SM falls. Overall they were still one of the best investments I put money into.

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