Retirement planning with endowment proceeds
If you hold an endowment for the repayment of a mortgage or to contribute to retirement, it is important that it is reviewed before maturity.
As part of a pension and retirement review, all wealth which can be used to meet retirement targets is accounted for. An endowment can meet an important need at-retirement, do you know what yours will be worth?
Endowments were very popular plans in the 80s and 90s and were often positioned as a key tool in planning repayment of an interest-only mortgage.
While endowments were often invested in ‘with profits’ funds, leading to concerns over miss-selling, funds were typically shielded from investment risk, and the policy had accompanying life or critical illness protection.
How does an endowment mature?
Endowments hold a target or maturity date. This is when funds will be available for release without penalty, and free of UK taxation. Be wary that upon maturity, any life cover element will also cease. If you have a linked debt such as a mortgage, it will be due to use for repayment.
A professional adviser can assist you across a number of important areas in relation to endowment policy reviews, including:
- A review over the investment element of the endowment plan. This includes how and where the funds are invested, an analysis of investment performance v target performance, risk level and trading costs.
- A check for any nominated death beneficiaries on the plan, and the option to add a nominated person to receive any funds upon death
- A check for protection and insurance levels. This includes a check on the person/s insured and whether additional benefits apply, like critical illness cover (CIC) or premium protection.
- Policy administration and management costs
- Cost of underlying insurance
- Insurance adjustment options
- Contribution history and requirements
- Maturity date and early encashment options
- Projected value at maturity
- Further advisory services in relation to the use of endowment proceeds
