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Sell My Endowment
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Sell My Endowment
So
you think you want to sell your endowment policy? Thats a big step -
maybe you should consider your options before you dispose of a policy
which you may have had for many, many years. After all most people who
have endowments got them in the 1980's where they became particularly
popular in the UK because of their tax treatment and, in particular, the
high inflation of the time. So much has changed in the intervening
decades. Read on too take a look at endowments and decide what are the
best options for you, your mortgage and your your endowment policy.
Whether
you are going to sell your endowment or not you should make a
well-informed decision not a hasty one as this could have big
implications for your financial future.
In
this article I am going to look at what endowments are all about, what
they issues with endowments are in today's markets, your selling options
for endowments, and other options if you decide not to sell.
First
off lets start at the basics what is an endowment policy? An endowment
policy is basically a retirement investment and life insurance policy
rolled into one. The general idea was that a home owner took out an
interest-only mortgage on their property and this capital was invested
in the stock market. The owner made lower repayments than with a regular
mortgage because they weren't repaying capital. Instead the stock
market returns on their investment was supposed to repay the mortgage at
the end of a set number of years - usually 25.
Endowment Policy Issues
The
issues of course today is that the stock market hasn't been doing so
well lately. The 7.5% growth rate often quoted for endowment policies
seems more like a bad joke than investment return to today's investors!
The under performance of the stock market and the death of inflation has
meant what was marketed as a "rock solid" "low risk" investment has
been anything but for many policy holders. Many endowment policy owners
are now faced with either not having enough from the endowment policy to
pay off their mortgage, or not being able to pay off that mortgage
before they retire - which were how many endowment policies were set up
to produce a freehold home by the time the investor hit 60 or 65.
Many
endowment policy holders when faced with this scary dilemma decide
immediately that there only solution is to sell their policy. There are
two obvious places to sell an endowment policy: either by getting the
company that issued the policy to repurchase it, or to use a third party
broker. There is a healthy market in endowment policies - and there are
brokers who will buy your policy from you. Typically brokers appear to
offer better rates to policyholders than available for the original
institution. In may appear crazy but often you will only be offer as
little as 10 cents in the pound to policy owners. If you are determined
to sell you may do well to shop around on line and in the High Street to
get the best price from those that make a living buying endowment
policies.
However selling the policy may not be the best
solution. Why? Endowment policies pay in two distinct ways - first they
offer annual revisionary bonuses - these are credited to your account
and cannot be removed. The bigger bonus is the terminal bonuses which is
paid at the end of the endowment's term. The terminal bonus can be a
significant figure but is discretionary and not guarantied. It entirely
depends on the future performance of the stock market between now and
when the policy becomes due. If you think the stock market is going to
improve then it may well be worth holding out for the terminal bonus. If
you are not convinced maybe you should cut your losses and sell.
Endowments
are also a notoriously front-loaded investment. That means that if you
sell your policy after only a few years you will get little back because
most of your payments will have gone in fees and charges - after all
the finance company isn't going to be left out of pocket you can be
assured of that.
Some people are put under pressure to sell
their endowment policy. They may be under threat of mortgagee sale on
their property in Britain's currently woeful property market. Or they
may have been contacted by the company and told that they are either
going to have to top up payments or extend the loan because the current
poor returns on the stock exchange mean that the capital is not going to
be sufficient to repay the original mortgage. This together with the
fact that the house may not now be even worth what the mortgage amount
is (remember its the original amount borrowed as no capital payments
have been made)
Many policy owners faced with this pressure will
sell at the first offer but you shouldn't do that - consider your
options carefully and don't let a salesman pressure into making a
decision you may later regret.
you think you want to sell your endowment policy? Thats a big step -
maybe you should consider your options before you dispose of a policy
which you may have had for many, many years. After all most people who
have endowments got them in the 1980's where they became particularly
popular in the UK because of their tax treatment and, in particular, the
high inflation of the time. So much has changed in the intervening
decades. Read on too take a look at endowments and decide what are the
best options for you, your mortgage and your your endowment policy.
Whether
you are going to sell your endowment or not you should make a
well-informed decision not a hasty one as this could have big
implications for your financial future.
In
this article I am going to look at what endowments are all about, what
they issues with endowments are in today's markets, your selling options
for endowments, and other options if you decide not to sell.
First
off lets start at the basics what is an endowment policy? An endowment
policy is basically a retirement investment and life insurance policy
rolled into one. The general idea was that a home owner took out an
interest-only mortgage on their property and this capital was invested
in the stock market. The owner made lower repayments than with a regular
mortgage because they weren't repaying capital. Instead the stock
market returns on their investment was supposed to repay the mortgage at
the end of a set number of years - usually 25.
Endowment Policy Issues
The
issues of course today is that the stock market hasn't been doing so
well lately. The 7.5% growth rate often quoted for endowment policies
seems more like a bad joke than investment return to today's investors!
The under performance of the stock market and the death of inflation has
meant what was marketed as a "rock solid" "low risk" investment has
been anything but for many policy holders. Many endowment policy owners
are now faced with either not having enough from the endowment policy to
pay off their mortgage, or not being able to pay off that mortgage
before they retire - which were how many endowment policies were set up
to produce a freehold home by the time the investor hit 60 or 65.
Many
endowment policy holders when faced with this scary dilemma decide
immediately that there only solution is to sell their policy. There are
two obvious places to sell an endowment policy: either by getting the
company that issued the policy to repurchase it, or to use a third party
broker. There is a healthy market in endowment policies - and there are
brokers who will buy your policy from you. Typically brokers appear to
offer better rates to policyholders than available for the original
institution. In may appear crazy but often you will only be offer as
little as 10 cents in the pound to policy owners. If you are determined
to sell you may do well to shop around on line and in the High Street to
get the best price from those that make a living buying endowment
policies.
However selling the policy may not be the best
solution. Why? Endowment policies pay in two distinct ways - first they
offer annual revisionary bonuses - these are credited to your account
and cannot be removed. The bigger bonus is the terminal bonuses which is
paid at the end of the endowment's term. The terminal bonus can be a
significant figure but is discretionary and not guarantied. It entirely
depends on the future performance of the stock market between now and
when the policy becomes due. If you think the stock market is going to
improve then it may well be worth holding out for the terminal bonus. If
you are not convinced maybe you should cut your losses and sell.
Endowments
are also a notoriously front-loaded investment. That means that if you
sell your policy after only a few years you will get little back because
most of your payments will have gone in fees and charges - after all
the finance company isn't going to be left out of pocket you can be
assured of that.
Some people are put under pressure to sell
their endowment policy. They may be under threat of mortgagee sale on
their property in Britain's currently woeful property market. Or they
may have been contacted by the company and told that they are either
going to have to top up payments or extend the loan because the current
poor returns on the stock exchange mean that the capital is not going to
be sufficient to repay the original mortgage. This together with the
fact that the house may not now be even worth what the mortgage amount
is (remember its the original amount borrowed as no capital payments
have been made)
Many policy owners faced with this pressure will
sell at the first offer but you shouldn't do that - consider your
options carefully and don't let a salesman pressure into making a
decision you may later regret.
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