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selling endowment frequently asked questions

 

Why are endowment policy holders selling endowment policies ?



Historically an endowment policy was a popular choice of investment to build up a fund to repay the mortgage debt at the end of the mortgage term.

An endowment policy was regarded as a reliable way to pay off the mortgage.

Only the interest on the borrowed money was paid each month, and an endowment policy was set up  alongside with the aim of building up the necessary fund needed.

 

But when deciding on how much to put aside each month (the premium amount), someone had to take a calculated guess at the how well the fund would grow during the interim period (usually 25 yrs).

That someone was the Government - in that through its financial arm (the Financial Services Authority, as it is known today) they laid down the limits on the growth rates that the endowment policy companies could use.

 

These companies then tended to use the higher end of the growth rate allowed, when calculating the monthly premium, because by doing so the premium was lower than if they had assumed a low growth rate, and by doing this they were able to illustrate how affordable their own brand of endowment policy was, by comparison to one of it's competitors or by comparison to the amount payable each month if set against a "repayment" mortgage (capital and interest).

 

In fact the projected amount at maturity was often in excess of the mortgage debt, thereby rendering a tax free cash lump sum - Yippee!

 

However, actual performance has not been as predicted leaving many endowment policy holders receiving "Red Letter" warnings telling them of a potential shortfall, and how to compensate for it.

 

So to answer the original question ........... endowment policy holders are selling their endowments because they have lost all faith in them, and as it is possible to get more money by selling an endowment than surrendering it back to the issuing endowment company, its got to be worth finding out "how much will I get for my endowment policy if I sell it, compared to just cashing it in ?

 

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Selling endowments

Selling endowments to one of only six endowment policy traders that are  members of the Association of Policy Market Makers, instead of cashing in endowments early, can be achieved by using the "sell endowment" link at the top of the page, or by clicking here

 


 

The information on this web site is intended as "information only" and should not be taken as "advice".

If you are unsure about what to do, if anything, about your endowment policy, you should consider taking advice from an independent financial adviser who is regulated by the Financial Services Authority