Endowment Problem!! I'm being robbed by a PLC!

[crammy69]

Not sure if anyone here can offer any advice, but here goes...

I have an endowment with a well known Insurance company (now PLC) started 16 years ago. Every year or so I call up to see what the surrender value is to decide whether to carry on with it or not, its not expeceted to cover the original mortgage ( they've been honest about that!) but its generallly remained worth about what I have paid into it with maybe a 2/3 % return, so not great but not the end of the world. Anyway I called them last week to ask the current surrender value as I had read in the paper that the company were imposing some cuts to returns/ penalties. The nice young lady told me the current surrender value (£25,750) so I told her I wanted to cash it in. She told me that she could start the process but that as its in joint names the wife would also need to be on the phone, so I said I would have to make arrangements for us both to be on the phone. She also said the the cuts in value I had read about in the paper do not affect my type of 'low cost with profits endowment policy. I asked a few more questions to establish that the value would not change dramatically on a daily basis, and she assured me that it would change only by fractions of the monthly payment as the Surrender Value was set until the next payment was due.

So today I made arrangements for the wife to be by the phone, called them up again and lo and behold they say Ill get £3500 less!!. I was today told that 2 days after I had called they changed their policy and introduced some cuts to bonuses or something and that its was unfortunate but that was that. I argued (calmly) that they had not written to me, or said this was a possibility when I had previously called. The young man informed me that it was all over the internet and that I should try an keep in touch with the fast moving world of finance (yeah, thanks sonny).

I've asked the young man to check their tapes and see for himself what I was told, and my mortgage broker also says I should write to them, but does anyone have any other useful advise / experience to share on this?

Cheers
Simon

 

[Deleted member 6183]

Nu?

 

[pammy]

Not sure you'll get anywhere as it usually does say that the values are calculated on a daily basis and until you actually cash it in the value will only be indicative. But it sounds like you've been given duff advice

I've just had two mature with Zurich and they were atrocious to deal with in every sense of the word. Some of their staff were great and really helpful and knew what they were doing. Others could barely string two words together. The second letter of apology I got acknowledged how dire their service had been!

 

[Beetnik]

Stark reality is that they've pooled your money with thousands of others and invested the money largely in property and shares. At the time you want out they've looked at your share of the pot and, of course, it's worth less than it was last week, last month or last year.

I got surrender values a few months ago on a couple of policies and found them worth substantially less than two years previously, despite all the premiums I'd paid in the meantime. Decided if I was going to have a depreciating asset it might as well be sat on my driveway as locked up in UK plc so got out.

Nice new shiny black SLK was the result :bannana:

Fortunately the mortgage related endowment policy I have maturing in 18 months has a guarantee attached to it so I'll get the full amount which is just as well as the last time I got a valuation it was only 2/3 of the way to the maturity sum guaranteed and that was before the current crisis.

 

[crammy69]

I got surrender values a few months ago on a couple of policies and found them worth substantially less than two years previously, despite all the premiums I'd paid in the meantime. Decided if I was going to have a depreciating asset it might as well be sat on my driveway as locked up in UK plc so got out.

Nice new shiny black SLK was the result :bannana:

That's the way I feel, Id rather pay down the mortgage and know what I'm saving each month on Interest and not having to make the payments.

Pammy,

I fear (expect) Ill get much the same sort of response, "We admit we shouldnt have said that, however, sorry and all, but you are now 3 1/2 bags poorer old son, nowt we can do about it." Ho hum.

 

[grober]

There used to be a company that traded endowment policies. There apparently is/was a second hand "market" for these. The prices they offered were often more than the surrender value offered by the insurance company.
http://www.apmm.co.uk/ I have no direct experience of this company so tread carefully and get advice before doing anything. It may be that is not a viable option in the present financial climate but might be worth an enquiry??

 

[crammy69]

There used to be a company that traded endowment policies. There apparently is/was a second hand "market" for these. The prices they offered were often more than the surrender value offered by the insurance company.
http://www.apmm.co.uk/ I have no direct experience of this company so tread carefully and get advice before doing anything. It may be that is not a viable option in the present financial climate but might be worth an enquiry??

Thanks, I gave them a call last year, the Insurance company themselves gave me their details!, and thier bid was about £200 more than the surrender value. however given the current climate I cant see them being very interested now!, Still may be worth a call. cheers.

 

[Smiley]

Try www.aap.co.uk
Like you I was wary but I sold a policy earlier this year and these guys offered a little bit more cash and they were super efficient - the cheque was back with me just about by return.
Like you I took out endowment policies before I really understood how they worked. Years ago they were great as the with profits policies were run conservatively and there was always spare in the "pot" to give a good final bonus. Then things got more competitive and the pot shrank as payouts were increased. Then lacklustre and poor stock market perfromance took its toll and the results have been shocking. At least one company (Std life) has been privatised so they now have share holders who want dividends - all from the same pot.
My view is that with profits policies have had their day they are old fashioned non transparent and can be pretty certain to deliver either dire, poor or at the very best average performance. On top of that you are at the mercy of the company who can make its own decisions about applying "market value adjustments" - actually it is a straight penalty to try and stop you pulling your money out. They have applied MVAs before in the stock downturn in 2000/2001 and then removed them - recently they have been applied again.
It sounds like you have had a 15% MVA applied to yours. Fight them to try and get the original sum paid out quickly - then use it to pay down the mortgage. If not try AAP but as you say they will be offering less now as well. If you can not get the larger sum then you may be better to sit tight wait a couple of years for recovery + removal of the MVA then cash it in. Dont forget that there should be reductions coming through in your mortgage payment after todays interest rate cut so the amount you will save by paying off early will go down.
Sorry it is a bit long but hope it helps.

 

[crammy69]

Thanks Smiley, I can understand the MVA, in fact its easier to reconcile with market movements than the supposed 'smoothing' effect that with-profits were supposed to have. Unfortunately my mortgage is at a fixed rate until February, but fortunately is very small!. I just want to get rid of it and tidy my finances up a bit. Good point about Std Life, shows I can only expect their treatment to get worse rather than better.

Cheers

 

[verytalldave]

An endowment policy only becomes fully viable if it is allowed to run its full term.
Its not something that you should ever look at with even the possibility of needing or wanting to cash it in before full term.
How long has your policy to run? If its only a matter of a few years of maybe even a bit longer, it will be worthwhile letting it mature to its full term. That is the only way to minimise any potential losses.
If you dont want to contribute to it any more, you can always have it converted to a "made-up" policy whereby you still have to wait until the full term before being paid out but you dont have to plough in any more contributions.
Selling endowments is only slightly better than cashing it in. All they do then is sell on your policy to someone else who will reap the financial benefits payable only at full term.
There is nothing at all to stop you selling your policy to anybody - you own that policy remember - to a friend or relative for example - who may want to save money via an endowment policy. All you have to do is reassign the policy to whoever buys it.

 

[vijilants]

I sold an endowment policy a couple of years ago to a company that buys them and got substantially more than the surrender value.

If you do decide to cash it in for whatever reason, sell it rather than surrender it.

 

[crammy69]

The thing is, my confidence in the firm is at such a level that I rather lock in my 'loss' now whilst there is a definable amount available. My personal view on the Investment returns and potential upside in these sort of policies is far from optimistic. Im tired of their often misleading and opaque information, and never feel that I am given enougth information to make a rational investment decision, these airy fairy terminal bonuses etc are impossible to predict and factor in. I want my money!.

 

[crockers]

An endowment policy only becomes fully viable if it is allowed to run its full term.
Its not something that you should ever look at with even the possibility of needing or wanting to cash it in before full term.
How long has your policy to run? If its only a matter of a few years of maybe even a bit longer, it will be worthwhile letting it mature to its full term. That is the only way to minimise any potential losses.
If you dont want to contribute to it any more, you can always have it converted to a "made-up" policy whereby you still have to wait until the full term before being paid out but you dont have to plough in any more contributions.
Selling endowments is only slightly better than cashing it in. All they do then is sell on your policy to someone else who will reap the financial benefits payable only at full term.
There is nothing at all to stop you selling your policy to anybody - you own that policy remember - to a friend or relative for example - who may want to save money via an endowment policy. All you have to do is reassign the policy to whoever buys it.

Not entirely true...February we had our annual statement from Friends Provident....with one year to go to maturity. I calculated that one years premiums + the interest paid on the surrender value (if cashed in and paid off the mortgate) would be more than I could expect with 7% growth.

So I called up for a surrender value and forms - filled them in and sent them off. SUrprise surprise I got a call saying the surrender value was now £1500 less than quoted. When asked why - the answer was - you have now passed the anniversary date (this had happened on the sunday - my forms posted on the friday) and we have reduced bonuses.

To cut a long story short I politely wrote to them explaining that the forms were sent and dated in the right year...They replied - saying that in this case they would honour their original surrender value....

In hindsight if we had left this to go to maturity - we would be one years premiums worse off £1500 reduced bonuses worse off and any reduction applied do to the current market - most likely no terminal bonuses being paid..so in this case it made massive sense to surrender when we did..

 

[verytalldave]

Not entirely true...February we had our annual statement from Friends Provident....with one year to go to maturity. I calculated that one years premiums + the interest paid on the surrender value (if cashed in and paid off the mortgate) would be more than I could expect with 7% growth.

So I called up for a surrender value and forms - filled them in and sent them off. SUrprise surprise I got a call saying the surrender value was now £1500 less than quoted. When asked why - the answer was - you have now passed the anniversary date (this had happened on the sunday - my forms posted on the friday) and we have reduced bonuses.

To cut a long story short I politely wrote to them explaining that the forms were sent and dated in the right year...They replied - saying that in this case they would honour their original surrender value....

In hindsight if we had left this to go to maturity - we would be one years premiums worse off £1500 reduced bonuses worse off and any reduction applied do to the current market - most likely no terminal bonuses being paid..so in this case it made massive sense to surrender when we did..

Unfortunately true. However this is a very recent phenomena. Up to a year or so ago, my statement in 99.9% of cases would have been valid.
Now, with the financial meltdowns we are experiencing, perhaps early redeption in some cases is the better opinion. However, I would still advise caution and be absolutely 100% sure of maturity value before surrendering any policy.

 

[kth286]

I would never accept anything verbally without getting it confirmed in writing.

Get all the paperwork from them including the surrender forms etc and then PONDER and try and understand your options, and how the figures stack up.

You can always ask further questions for clarification, and also you will have decumentary evidence should you wish to pursue a claim via the financial ombudsman.

Also do consider the life assurance element built into the policy which will lapse on surrender.

Is it important that you have life cover for a dependent perhaps.

And finally do check if the policy is assigned to the mortgage lender, as the proceeds may be payable to the lender if so.

 

[ukcodger]

Where are these people going to get customers from in the future. In my case my Life Assurance company has turned from a Mutual to a Bank. Consequently there's weasel words coming ten-a-penny about "no annual bonus, but that's to protect investors, blah blah".
So when they've matured will I consider another policy? Not on your life, never mind own life!
I think it's a route to oblivion for these companies.

 

[crammy69]

Oh yeah, oh yeah, oh yeah

Great News!!!!

I have just had a call from the company today, and having listened to the tapes of my original conversation with them, they have admitted that they "had not been as clear as we could have been" and that "we gave you wrong information", and that they "should have explained further".

The upshot being that they are honouring the initial surrender value!

:bannana: :bannana: :bannana: :bannana: :bannana:

Thanks for all your help!

 

[Beetnik]

Brilliant - you must be well chuffed!

 

[Mudster]

cash it in quick before the buggers change their mind again.....

 

[crockers]

Unfortunately true. However this is a very recent phenomena. Up to a year or so ago, my statement in 99.9% of cases would have been valid.
Now, with the financial meltdowns we are experiencing, perhaps early redeption in some cases is the better opinion. However, I would still advise caution and be absolutely 100% sure of maturity value before surrendering any policy.

I would also point out that to surrender early may lose you valuable life cover that can't be replaced if health is an issue.

ALWAYS TAKE ADVICE BEFORE SURRENDERING A POLICY............