Our 25 year endowment is maturing next month and due us converting our mortgage some time ago to 80% repayment we will end up with quite a large amount of money left over once we pay off what remains of the mortgage.
My very naive question to you guys is do we need to declare the money we gain in our pocket from the endowment?
I'm pretty sure I'm going to have to pay some kind of tax....
The paper we've just received makes no mention of it, just asking where do we want the money paid and some thing about anti money laundering (we've been paying into this endowment for 25 years!).
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I was in the same boat as you. Mine matured in 2010 and was tax free.
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Ours too we’re tax free a few years ago. I doubt it’s changed. They got a bad press for a while when people had a shortfall against the outstanding mortgage. As I had already cleared the mortgage I had a tidy tax free sum left over.
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Well that is a very very pleasant and welcome surprise...
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>> a bad press for a while when people had a shortfall against the outstanding mortgage.
They were oversold in the early days. Promises, probably unachievable, of a large excess after the mortgage was paid off, few warnings of a possible shortfall. In my case I took one out because it was the only way I could get a hefty 3.75x joint earnings mortgage at the time.
At the end of the day 25 years later there was a shortfall of £4k, but of course that mortgage had long since been dumped in favour of a repayment one, the the shortfall was a mere tiny dent in a very welcome cash boost. That, along with a cash chunk taken from my pension, allowed me to be retired and mortgage free at 55 years of age.
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My first endowment policy was sold to me by a solicitor in Scotland over 40 years ago and he was very clear about the benefits and risks.
Like Zero I paid off the mortgage by other means. The maturity sum meant I could then partially live off it and increase my pension contributions from income and get 40% relief. As ever to anyone reading this and thinking of following suit, please take professional advice.
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>> They were oversold in the early days. Promises, probably unachievable, of a large excess after
>> the mortgage was paid off, few warnings of a possible shortfall.
They were massively oversold up to the nineties. Once tax relief on the premiums was removed and investment growth slowed they looked much less certain. I had to overcome outright scorn from Estate Agents, who would get big commission on endowments, because I insisted on a repayment mortgage. My theory that I was better of investing spare cash in Unit Trusts or the then equivalent of ISAs for investment growth was met with the outright lie that endowments did not involve the stock market.
My Father had taken one out c1960, long before they were fashionable. In spite of him having a full 25 years in a period of pretty good growth and getting tax relief at well over the then basic rate of around 35p+ the excess was only enough to get top of the range Honda Accord rather than a more basic model.
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Endowment or repayment is an easy decision to make in hindsight.
Timing is the key - if the policy matures whilst the market is high there will probably be an excess. If less fortunate one could be looking at a substantial shortfall at a time when retirement is starting to appear on the horizon.
Personally I went for repayment - I was simply risk averse. Inflation effectively took care of the mortgage by the time I was 50. Over 25 years we went from a 90% loan to value to ~15%. When we moved 15 years ago the small mortgage outstanding was simply repaid from savings.
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I paid into a life policy for 30 years - started when I was 35.
I took out the policy with Royal Life for the first 10-15 years all seemed well - annual bonus was in line with what I could see. The annual bonuses then died and then the policies were taken over by Phoenix.. ................ no annual bonuses and terminal bonus was modest.
Phoenix buy up Zombie Lie Companies - keep taking premiums and their fees - made the founders megabucks whilst punters got poor returns.
If I had chosen another life company, say Standard Life, on a 25 year policy I would have more than doubled my payout.
My "new Jaguar XJ fund" did not live up to my dreams.
Last edited by: Falkirk Bairn on Mon 16 Aug 21 at 10:12
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My first mortgage, aged 21, was an endowment. That was 45 years ago, and I think after several years I changed it to a repayment type. I can’t remember any specifics, but I do know that aged 30, after paying into a private pension for about 5 years, I stopped the private pension and diverted the pension payments into mortgage payments, bought a much larger gaff outside of a crabby Bradford estate and kept moving in a NW direction.
I think I was sold the wrong type of mortgage initially, but at that age my thoughts weren’t focused on finance, only girls and sport.
Mustn’t grumble
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I had two. First one was for £33,725 and was fit for purpose at the time and in fact a reasonable investment. Second one was taken out to cover an additional £22k when we bought abother property. This was deemed to have been mis-sold a few years later and I was compensated to the sum of £5k - I used to this to pay a chunk off my mortgage and then over-payed with spare income meaning I became mortgage free at 46yrs old. I kept both on and they ended up paying out upon my first wife's untimely death..
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Standard Life Low Cost Endowment in 1986 for £22k and a top up of £15k two years later when we moved again.
Claim for mis-selling in 2002 plus a work bonus paid off the mortgage.
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Can you get endowment mortgages any more?
Got my first mortgage earlier this year and did the usual comparison sites, I don't think I saw any advertised. Didn't come up in conversation with the broker either.
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Forgot to add...
When cashing in the endowment, I wanted to use a third party company that were paying 10% more than Standard Life. They would keep up the payments until the end of the policy term and benefit from any life insurance claim.
The Mrs Z at the time refused to allow this claiming that she didn't want an unknown having an interest in us dying.
Then last years season 7 of Endeavour had this theme as a running plot through the series. I wonder if it has ever happened in reality.
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>>I became mortgage free at 46yrs old
7 years after me.
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In the early 80s I worked in an office where the deep pocketed scotsman was for ever championing the wonders of an endowment mortgage. Endless arguments ensued, with me pointing out the price of a loaf of bread was probably the best he could hope for. I often wonder how much he claimed for mis-selling. he probably drank himself to death - so he was probably never worried.
Last edited by: sherlock47 on Mon 16 Aug 21 at 11:37
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I think a lot of mis-selling was where people were advised to cash in an old policy on moving house rather than rolling it forward and taking up a new policy to cover only the additional amount of the new loan. They were instead sold a new policy to cover the whole new loan total.
This meant a whole new commission and being tied to a new later end date. If you had honest advisors (as I did) you took out successive policies on any additional new amount. In my case as the first policy paid out I kept the mortgage payments the same. This significantly reduced the term of the remaining mortgage.
Whether I was really better off in real terms in having an endowment is too tricky to calculate. Three policies, rampant inflation, even more rampant house prices inflation, over paying, good pay rises ……who knows? In any case those of us who have in the market for many years are likely to be quids in.
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I think there is a big business in buying endowments which people have been frightened into selling, it wasn't until I looked into it that I realised that a big wad of the cash is made at the very end just as it matures..
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>> I think there is a big business in buying endowments which people have been frightened
>> into selling, it wasn't until I looked into it that I realised that a big
>> wad of the cash is made at the very end just as it matures..
Yeah the terminal bonus is all that makes it attractive.
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Endowment cash - Zero
