When Endowments go wrong

Back in 1993 I bought a flat in Cheltenham, a nice flat it was too. OK when I bought it it didn’t actually exist and was just a muddy swamp but I saw it being built. I stood in it when it was an empty shell with no internal walls and over the weeks I saw it grow from mud into a nice first floor one bedroom flat.

It cost £39,377 a tidy little sum in those days. I took out a mortgage with Barclays and the financial advisor “sold” me an Endowment policy to repay the mortgage. The premium was £51.56 a month and I was assured that this would pay my mortage off. All seemed well for the first few years, the first progress report showed that it was doing so well it would actually exceed the £39,377 I needed.

But then, like the wayward child who stops doing well at school and ends up staying out all night drinking, my policy went off the rails. A small excess turned into a small deficit, which turned into a bigger deficit.

By July 25th 2008 with 10 years left to run and having given them £9280.80 my policy had a value of £10,967.91

So I’ve paid them £9280.80 in installments and they have turned this into 10976.61 which means the wonderful people at Legal General, those people who know the stock market have increased my investments by 1687.11 in 15 years.

Over the course of 25 years I would have paid them £15,468 and the last estimate my Endowent could “at worst performance” figures produce a return somewhere between £14-15K.

So I’ve cashed it in today. I’ll take the money and stop pouring money down a hole. I would have been better off just putting £51.56 in a bank account every month for the past 15 years.

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