Should you sell your endowment?

Pros and cons of selling your endowment

If you sell your endowment, you might:

• Get more money than cancelling it

• Stop paying money into it

• Be able to pay off your mortgage

• Invest in something better

• Get less than the maturity value

• Be unable to sell your policy

• Pay mortgage repayment fees

• Need financial advice

How selling your endowment works

If you hold an endowment policy, you can sell it to a third party before its maturity date. You might want to sell if your statement shows it is worth less than you thought, or if you need its payout before it matures.

Whoever buys it then owns the policy, meaning they get the payout when it matures and they have to pay the monthly premiums.

The amount third party buyers are willing to pay for endowments is usually higher than the amount you could get if you ask your provider to cancel the policy.

It also means you could get a lump sum for it within a few weeks instead of waiting until your endowment's maturity date, which could be several years from now.

How to sell your endowment policyWho buys endowment policies?

What are your alternatives?

Wait until it matures

Endowment policies were usually sold as an investment to pay off your mortgage at the end of its term and provide you with an extra lump sum.

But many endowments have made smaller profits than expected. This means the amount you get when it matures could be much lower than expected.

Ask your provider how much your endowment is likely to pay out at maturity. If the amount is lower than you want, you might want to stop paying into it.

You could consider selling it and putting the funds in a more profitable investment. You could also repay some or all of your mortgage now, although your mortgage lender may charge fees for this.

Stop making payments

You may be able to keep your policy until it matures but stop making any more premium payments into it. You could consider this if the premiums cost a lot but the final payout will be lower than expected.

The amount you get back when it matures will be less than if you continue to pay into it. If it includes life insurance, this could become invalid or the amount it pays out could go down.

Stopping payments is known as making your policy paid up. Some policies do not let you do this, so ask your provider if it is an option.

Surrender your endowment

If you ask your provider to cancel your policy before it matures, this is called surrendering it. Your provider pays you a lump sum now instead of at the maturity date.

You usually get much less than if you wait until it matures, and surrendering your policy could also come with fees and penalties.

This is called a market value adjustment, and it could mean you get back less than you have paid into your policy. Some charge smaller penalties when your maturity date gets nearer.

You can avoid surrender fees and usually get more for your endowment if you sell it to a third party instead of surrendering it.

Can you surrender your endowment for free?

Check how much you can get

You can get quotes for selling your endowment for free and with no obligation to go through with the sale.

Get quotes from several companies and compare this to how much you can get:

• If you surrender it: Make sure the amount they give you takes into account any fees you have to pay to your provider.

• If you keep it until maturity: Subtract the cost of the premiums you have to keep paying until it matures.

• If you keep it but stop making payments: You do not need to consider the cost of ongoing premium payments.

You can find out the surrender value and maturity value by checking your most recent endowment statement or asking your provider.

Working out how much your endowment can pay out with each option can help you decide which is best.

Is the maturity value guaranteed?

When you ask for the maturity value, remember that the amount may be estimated.

Some policies include a terminal bonus, which is paid when it matures and can be around half an endowment's final value. But this amount depends on how well the investment performs and is not guaranteed.

But other policies include guaranteed annual bonuses, which pay an agreed amount every year, e.g. 4%.

Check which companies can buy it?

Traded endowment companies have rules about what types they are willing to buy, usually including restrictions on:

• How long is left until maturity

• The type of policy (e.g. a with profits endowment)

• A minimum surrender value

Once you have details of your policy, you can check which companies are able to buy it.

Consider your financial circumstances

Do you need the money now?

Selling your endowment often means you get less than if you wait until it matures.

But if you need the funds urgently, for example to pay off a debt, selling your endowment could help you cover this.

Can you afford to pay back your mortgage?

If you took out your endowment to repay your mortgage balance at the end of its term, make sure you find another way to do this.

Selling your endowment could make you enough money to pay off your mortgage balance.

If not, you could use the lump sum to pay off part of your mortgage and then switch to a repayment mortgage.

This would replace your interest only mortgage and means your balance is paid off by the end of the mortgage term.

Switching to a repayment mortgage could cost more each month. But paying off part of your mortgage and no longer paying into your endowment could mean that it works out cheaper overall.

Will you lose your life insurance?

Endowment policies often include life insurance with them. If you sell your policy, you lose the life insurance cover.

This means that your beneficiary could not make a claim if you died, but the person or company that bought your policy could.

If you took out your endowment with a mortgage or other debt, life insurance can pay it off or give your family a lump sum if you die. If you still want this cover, you could:

• Get a new policy

• Speak to a financial adviser

Get advice

The companies that buy endowments do not usually give you financial advice. This means you need to decide yourself or contact a financial adviser.

An adviser can help you decide if you should sell and work out the best way to use the money you get for your endowment.

What to do if you decide to sell

Decide what to use the money for

Before you sell your endowment, work out what to use the money for. You could:

• Pay off your mortgage: If your endowment was taken out with your mortgage, you could use the lump sum to pay all or part of it off. Here are the benefits, risks and costs of mortgage overpayments.

• Invest your lump sum: You may be able to grow your funds by investing them the stock market, a savings account or your pension. Here is how to decide how to use your lump sum.

• Pay off other debts: If you owe money on a loan or credit card, clearing the balance can save you more money than you could make from many investments.

• Gift the money to someone else: If you want to pass some of the money onto your children or someone else, here is how tax works on financial gifts.

Find the best deal

Here is everything you need to know before you sell you endowment, if you decide this is your best option.

You can find a buyer for your endowment using our comparison, which gives you quotes from two traded endowment companies.