Endowments don't add up by Finance News Bulletin

Published: 16/11/06

More than 141,000 savers were sold donation insurance policies in the past 18 months as the best way to put asideLarge insurance companies, counting Prudential, Norwich Union, Legal & General and Standard-Life have not sold these plans for natural life as changes in tax and savings rules make Isas and pensions seem more attractiveMany savers opt for Isas because they are more flexible and do not come with the pricey life cover that is part and parcel of an endowmentThe returns on ten-year with profits endowments have been awful

Figures from respected periodical Money Management show the average has returned just £7,113 on a £50 a month (£6,000) investment while the most horrible from Colonial gave £5,528 Pearl and Phoenix also unsuccessful to break evenMoney Management claims organisations still trade with-profits endowments are Children's Mutual, Friends visionary, Healthy Investments, Liverpool Victoria, NFU Mutual, Red Rose, Scottish welcoming, Scottish Life and Sheffield MutualDavid Riddlington, senior actuary at Norwich amalgamation says: 'The savings culture has changed in recent years

There is greater stress on saving through your pension rather than an endowment'Endowments can last for anything from a minimum 10 years to 25 years or more Figures from the metropolis regulator Financial Services Authority (FSA) out last month show that one-third of policyholders don't last the course and cash in their rule - at high cost - within four yearsPart of your monthly spending are second-hand to buy life insurance which pays out if you die

The balance, after what can be heavy charges, goes into a finance investing in shares, bonds and in some cases propertyMuch of their current appeal is that the money you get after those long natural life of savings is tax-free But what they do not tell you quite so loudly is the fundamental fund in which your money is invested pays duty, typically at around 15% to 20%And while life insurance is crucial to those looking to give for a family in the case of the near the beginning death of the policyholder, a cheap word assurance policy does the same job

The yearly investment returns on a with-profits funds version of an endowment can be all but impossible to understandEach year the company looks at how it has done during the year and may award you a 'bonus' worked out by their figure cruncher If there is extra in the pot when you at last come to the end of your term, you could get moreIf you cash in your policy before the end of the word, you will be charged a fee, determined by the company at the occasion

And higher rate tax payers will countenance a tax bill if they cash in before it has run three-quarters of its term or ten natural life - whichever comes firstTim Cockerill from independent financial consultant Rowan Capital says: 'The only reason they offer this package is so they can make more money out of it It is hard to see why you would want to pay money for these old-fashioned, inflexible investments'Adviser Brian Dennehy from Dennehy Weller adds: 'Use an Isa for your asset as it has some tax compensation, the charges are lower and the are more flexbile

Term pledge gives you the life cover you want cheaply'Select a loan term 12 months (1 day 24 months (2 natural life 36 months (3 natural life 48 months (4 natural life 60 months (5 natural life 72 months (6 natural life 84 months (7 natural life 96 months (8 natural life 108 months (9 years) 120 months (10 years)Please choose a type of insurance Life insurance Home and contents Car Breakdown services physical condition - medical Health - dental Travel make a fuss of - dog make a fuss of

Visit original article: