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.