Royal Liver/Royal London Plus

[ondarack]

I have just got a few questions about a "With Profits Endowment Savings" policy I took out in 2006. I have been putting in 100euro monthly so is has cost me 7200 so far. According to my latest statement the surrender value is currently 3441 (it has hardly increased in the last 4 years) and the value at maturity is 15441 which is in 2021. My question is, when I took out the policy I had a sum assured of 16169euro, why has this now dropped to 15441? And also will I be liable to pay tax on profits(unlikely to happen) or all of the amount at maturity? Are there any other hidden charges? It states after the sum assured that "the premium includes the cost of protection benifits and all charges,expenses and sales remuneration" what exactly does this mean? Is this a dead duck of a policy and should I withdraw now and cut my losses?
All help and advice welcome!

 

[LDFerguson]

My question is, when I took out the policy I had a sum assured of 16169euro, why has this now dropped to 15441?

If the €16,169 was the basic sum assured written into your policy document (as distinct from a projection on an illustration) then it shouldn't go down.

Conventional with-profit policies are not very transparent in that it's very difficult to establish what the various charges are.

It states after the sum assured that "the premium includes the cost of protection benifits and all charges,expenses and sales remuneration" what exactly does this mean?

There is a small death benefit on the policy. If you died, I'd imagine that your estate would get the sum assured and not the surrender value. So the cost of this, commission to the sales person and Royal Liver's administrative expenses are all coming out of your premium and fund. That's the way all policies of this type operate - they don't charge you separately for the different jobs that are involved with maintaining your policy.

In order to make a judgement as to whether or not this policy is worth maintaining, you'd need to have a look at: -

1. the sum assured and bonuses attaching to date
2. the current bonus rate
3. the prospects of any final bonus in 2021
4. the realistic prospects of 2. and 3. continuing, by looking at how the fund is invested

As an aside, there are two other options apart from cashing it in: -

• You can usually make this type of policy "paid-up", i.e. pay no more into it but don't cash it in now either.
• When these policies were more popular, there used to be a secondary market where you could sell endowment policies for more than their surrender value. I don't know if this facility still exists.

 

[ondarack]

I suppose the long and the short of it is. Its current value is 3440, it has cost me 7200 to date so im -3760 already if I cashed out now. To my eyes I would probably be better of leaving it until it matures, then at least worst case scenario ill have paid in 18k and ill get 16k back out. Am I right in saying that? So are the charges applied to my assured sum in which case I may only come out with 15k or less?

 

[LDFerguson]

So are the charges applied to my assured sum in which case I may only come out with 15k or less?

No the charges are deducted before you see any bonuses added. That's why I can't understand how your sum assured could go down. That shouldn't happen.

 

[ondarack]

Its changed from Royal Liver to Royal London Plus a few years ago so maybe there was a policy change. So if I decided to wait till 2021 the very least I could expect is the 16k? no additional charges or taxes?

 

[LDFerguson]

Its changed from Royal Liver to Royal London Plus a few years ago so maybe there was a policy change.

I'm not aware that the take-over had any negative implications for policy terms and conditions.

So if I decided to wait till 2021 the very least I could expect is the 16k?

The very least you could expect is the original sum assured which should be on the policy document, plus any bonuses that have been added to date.

Be careful not to mix up the contractual sum assured (which shouldn't change) with any projections you may have received, which are only indications.

 

[ondarack]

Thank you for your help LD