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Endowment

Endowment Policies

These policies are investment plans with life insurance attached. They are often linked with mortgages and will pay out any returns at the end of the policy term or a lump sum when the policyholder dies.

They are long-term investment plans, typically lasting between 10 and 25 years. They can be used as a tax efficient savings plan to build a lump sum of money for any purpose or they can be used to repay an interest-only mortgage, which is often a requirement of the mortgage provider.

In order for the policy to pay out free of all personal taxes a set of HMRC rules need to be adhered to. These rules include that the amount paid out on death needs to be a minimum of 75% of the premiums paid during the term of the plan and the policy term is at least 10 years.

Endowments can be unit linked which means that you buy units in a fund or can be invested in a 'with-profits' fund.

Many are familiar with Endowment Policies and have been selling or surrendering them due to disappointing investment returns. An Endowment Policy is designed to return a specified target sum of money at the end of the term. If, however, the life assured dies during the term of the plan, a specified lump sum benefit would be paid. These policies can be expensive and as some of the premiums are used to provide for the life assurance element, the full premium is not used for investment purposes.

If you are considering surrendering your Endowment or think you have cause for complaint, you should speak to us before you do anything. There are alternatives to surrendering your Endowment.

Please be aware that in some cases this type of assurance is based on an assessment of the health of the applicant.

THE VALUE OF INVESTMENTS AND THE INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

FOR UNITISED ENDOWMENT PLANS, THE VALUE WILL VARY AND THERE COULD BE NO CASH IN VALUE IN THE EARLY YEARS. FOR WITH PROFIT PLANS A MARKET VALUE REDUCTION CAN APPLY ON ENCASHMENT, AND THE EVENTUAL VALUE WILL DEPEND ON HOW BONUSES/PROFITS ARE DISTRIBUTED.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.


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