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Standard Life Endowment

Surrendering Your Standard Life Endowment? Get an Endowment Quote to see if you can sell your policy.

If you have a Standard Life Endowment you should receive a projection letter every 2 years which will tell you whether your endowment policy is on track. In addition to the projection letter you will receive from Standard Life a FSA factsheet is included which provides more information on your options.

When deciding what to do with your endowment it is important to remember

Investment Performance – Falling UK inflation has been a factor in lower investment returns. In addition there have been a number of global events that have affected stockmarkets both in and outside the UK over the last 6 years e.g. 9/11
Interest Rates – While investment returns have generally fallen over the last 6 years interest rates have also fallen which has meant that that for those using their endowment to pay off a mortgage monthly repayments will have been lower over the same period.
Changes in Tax treatment – Changes in tax legislation over the years has seen the removal of tax relief on mortgage interest repayments.

If after having considered your options you wish to cash in your Standard Life Endowment as well as getting a surrender value quote from standard Life you should also get an Endowment Quote to see if you can sell your policy.

Endowments - A brief history

Standard Life along with many other UK insurance companies sold endowment policies in the 1980s and 1990s mainly as a vehicle for people to pay off their mortgage debt. An endowment mortgage policy is a life insurance savings policy which is designed to grow over a certain time scale (often 25 years) to pay off the amount borrowed to purchase a property. So in this respect the homeowner pays the interest on his/her mortgage and a monthly premium into the endowment mortgage savings plan.

Types of Endowment

There a basically two types of endowment policy. A "full" endowment mortgage policy is where there is an underlying guarantee, that all of the mortgage amount will be paid off. In paying for this guarantee the monthly premiums are expensive which explains why the second type of endowment mortgage, the "low cost" endowment mortgage has been by far the most popular plan sold to millions of UK householders over the last 20 years. Both "full" and "low cost" endowment mortgage policies are linked to the stock-market. "Low cost" endowment mortgages do not guarantee to pay off the mortgage at policy maturity and they are dependent on positive stock-market returns to ensure that they do.

The majority of endowment mortgage policies taken out in the 1980s were "With Profit" plans linked indirectly to the stock-market. A With Profit low cost endowment mortgage consists of an underlying guarantee called the basic sum assured upon which the insurance company will pay annual bonuses dependent on the profits made by the insurance company through its With Profit fund. This With Profit fund is invested in stocks and shares, however the fund is managed to provide a "smoothed" return so that investors are protected from stock market volatility. In this respect the With Profit fund will keep back some of the profits during strong performing years to compensate investors in years where the returns may be poor. It is the combination of the basic sum assured and the bonuses accrued over the life of the endowment mortgage policy that in theory will add up to the sum required to pay off the mortgage. Over the last five years we have seen a dramatic fall in With Profit fund bonuses as global stock markets have declined in value, so much so that many insurance companies can no longer provide endowment mortgage policy holders the assurance that the final maturity payouts will cover their mortgage.

Standard Life With Profit Endowment policies are normally distinguished by a policy number starting with X e.g X1234567

In the late 1980s insurance companies introduced "Unit Linked" endowment mortgage policies as an alternative to With Profits. These types of policies are directly linked to the stock market and therefore are more prone to fluctuation in value as there is a direct correlation with general stock market performance. As a result these policies have been harder hit by stock market falls in the last few years.