Surrendering your endowment is only one option, says APMM

03 June 2008 / by Rachael Stiles
As times become hard for those worst affected by the credit crunch, APMM – the Association of Policy Market Makers – is urging people who hold endowment policies to consider the other options available before surrendering them.

As people tighten their belts in order to keep up with soaring mortgage rates and higher food prices, APMM understands that many might be trying to find ways of scraping together some cash, and that getting rid of their endowment policy might seem like an easy option.

However, it has suggested that policy holders should consider all the circumstances and options available to them, seeking expert advice before opting for endowment surrender to the company they bought it from.

Firstly, the APMM said that owners of an endowment should see if they can take a payment holiday if the reason they want to surrender is that they are struggling to keep up with the monthly cost.

The age of the policy is also an issue, it said. If the policy has been running for less than six years, then the value will not be significant.

It said that owners of endowments should check the surrender value and any bonuses which have accumulated because there might be very little benefit to surrendering, and, if it was taken out to cover a mortgage, it could leave a shortfall.

If a person is determined to get rid of it, then selling an endowment policy instead of surrendering it is worth considering, the APMM said, because this could mean that the owner of the policy gets considerably more for it than if it were surrendered.

Brian Goldstein, Chairman of the APMM, said: "It is vital that endowment policyholders either get professional advice or ensure they have considered all their options before they dispose of their policy. We estimate that around £90million is lost annually by people surrendering their policies rather than selling them to market makers and this figure could increase in 2008."

What many people have found is that their endowment policy will not have grown enough in value to cover their mortgage – either because it has not matured at a rate that was expected or because they have been mis-sold endowment policies – so they consider surrendering their endowment but often find that they can get much more by selling it instead.

"Policyholders are currently receiving an average of 10 to 15 per cent more than the surrender value of a policy by selling them on to market makers." Mr Goldstein concluded. "For anyone who has already decided to dispose of their endowment, it could make good financial sense to get a quote for selling the policy rather than surrendering."

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