Selling endowments could help grandparents support loved ones

Over a third of grandparents currently put money to one side for their grandchildren, with over 40 per cent claiming they save on a regular basis, new research has revealed.

According to the study by OnePoll.com commissioned by F&C Investments, a greater proportion of grandparents in London save or invest for their grandchildren compared to the rest of the country.

This could be because of higher private school fees and more expensive property, meaning loved ones may need a helping hand when it comes to putting a deposit down on their first home.

Grandparents who want to financially help out their grandchildren for a number of expenditures, including education, the cost of a new car or a deposit on a first home, may have considered taking out a loan or dipping into their savings in order to be of some assistance.

However, putting their own finances at risk may be a route many grandparents will want to avoid, but at the same time, they could be concerned how loved ones will cover the cost of such ventures.

Chris Radford, chief executive officer of aap - the UK's biggest buyer of endowment policies - said some of its customers with grandchildren had decided to sell their underperforming endowment policies in order to help raise the cash to cover the cost of education for their loved ones, as well as other expensive outgoings.

The study discovered that providing funding for education is the most common reason why grandparents save money for their family. This percentage increased for those living closer to London.

For 30 per cent of grandparents, saving allows their grandchildren to spend the money on whatever they like, which could include a new car for when they pass their driving test.

Commenting on the findings, Jason Hollands, director at F&C Investments, said: "The UK economy differs widely across the country so it is perhaps less surprising to see a greater proportion of grandparents based in and around the capital investing for their grandchildren.

"With London and Edinburgh the UK's biggest financial centres, it is also unsurprising to see grandparents in these locations most willing to use stockmarket-based investments."

Mr Radford, from aap, said some of its customers had decided to sell their unwanted endowment policies in order to raise the cash to help financially support their grandchildren.

He added that should aap make an offer to purchase an unwanted endowment policy, it will always pay more than the surrender value offered by the insurance company.


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Could selling endowments help business owners stay afloat?

Owners of small businesses in the UK are working longer hours to ensure that their companies do not go under, a new survey has found.

On average, small-business owners work 47-hour weeks, while one in six admit they put in 65 hours a week to stay afloat, the research by Abbey and Alliance & Leicester Business Banking revealed.

More than a third of such professionals are now working longer hours than they were a year ago. In the second quarter of 2009, the number of insolvencies rose by almost 40 per cent when compared to the same period of 2008.

Many business owners of small enterprises could be tempted to dip into their own savings or to take out a personal loan in order to prop up their company.

However, this could store up monetary problems for the future and many business owners may prefer to raise the cash needed to keep their firm afloat without resorting to loans and their own savings.

Chris Radford, chief executive officer of aap - the UK's biggest buyer of endowment policies - said some of its customers who own businesses had decided to sell their underperforming endowment policies in order to raise the cash to clear their company debts, without falling into the red at home.

Under the European Working Time Directive, the maximum number of working hours permitted is 50 hours. Rather than putting in significant hours at work or relying on personal loans and savings to see a company through the economic downturn, Britons may want to find a large sum of cash to place themselves on a more stable footing.

Paula Ickinger, head of business banking marketing at Abbey and Alliance & Leicester, said: "The recession is having a huge impact on small businesses in this country and many owners are sacrificing their work-life balance by working longer hours as they struggle for the survival of their business."

Mr Radford, from aap, said some of its customers who own their own businesses had decided to sell their unwanted endowment policies to help keep their company afloat.

He added that should aap make an offer to purchase an endowment policy, it will always pay more than the surrender value offered by the insurance company.


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Should I bin this endowment policy?

I have an endowment policy with Aviva that matures in 2020. I pay £61 per month and its current value is £16,900.



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I need the power to run mum's finances
The surrender value is £8,500. It has no impact on repaying my mortgage as I have moved house and chose to take a repayment mortgage on the new house.
Is it worth still paying the endowment or do I cash it in/sell the endowment to a third party? M.H., Cardiff

Danny Cox, head of financial planning strategy at independent financial adviser Hargreaves Lansdown, replies: Endowments are no longer the first port of call for savings.

Endowments can be expensive and they are not as tax efficient as either an Isa or a unit trust savings plan.

The investment options are usually limited and with-profits is a common option that is simply no longer a good way to invest.

I am pleased to see you have switched to a repayment mortgage.

In my view, at the very least your regular premiums will have the potential to do better elsewhere, though, of course, nothing is guaranteed.

Your main options are:

1. To cash in the endowment. You should check whether you could sell the policy and get a better price using a traded endowment broker. I don't quite understand why anyone would want to buy a second-hand endowment, but if you can get better value by selling, this makes sense.

2. Stop paying premiums and leave the endowment to mature. With this strategy you will be hoping that over the next 11 years the policy comes good.

3. Keep going. I am not convinced that this is a good use of money

Any savings made on the endowment plus the proceeds from the sale or surrender should first be used to repay capital from your mortgage or accelerate the repayments.

You need to bear in mind that the endowment has some life insurance built in which you will lose if you stop payments.


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Could selling an endowment be a way out of debt?

An increasing number of Britons are hiding the true extent of their debt problems from their partners through embarrassment, it has been revealed.

Research by Sainsbury's Finance showed that almost a fifth of consumers who are in a relationship and in debt have failed to divulge the full financial picture to their spouses.

Such findings mean that some 1.75 million people are hiding their debt from their other halves, while 1.92 million secret shoppers admit they conceal big purchases from their partner.

However, Chris Radford, chief executive officer (CEO) of aap - the UK's biggest buyer of endowment policies - said some of its customers had sold their unwanted endowments in order to meet their debt management needs.

Many Britons are currently choosing a different path. The poll discovered that eight per cent of adults frequently miss deadlines for bills, while seven per cent delay opening or ignore post that looks like demands for payment.

Furthermore, seven per cent of people admit they ignore or delay opening bank statements.

"The current economic climate is only exacerbating many people's personal financial concerns and our research highlights that there is a huge temptation to stick your head in the sand and hope it all goes away," stated Karen Horsburgh, head of Sainsbury's Money Matters.

"However, if you have money worries the best course of action is to tackle any financial concerns head on and seek advice on how to start rectifying the situation," she advised.

Indeed, 3.88 million individuals describe their own financial situation as "awful" or "pretty bad". Recent figures from the Insolvency Service showed that insolvencies rose by 27.4 per cent in the second quarter of 2009, compared to last year.

Rather than taking out personal loans and credit cards to pay off debt and hiding the true extent of their financial difficulties, some Britons may want to ensure the route they take does not push them further into the red.

After speaking to their partners about their monetary worries, homeowners may decide that clearing debt with a sum of cash is a better option than using credit as a crutch.

Chris Radford, CEO of aap said if the firm decides to make an offer to buy an underperforming endowment policy, it will always pay more than the surrender value offered by the insurance company.

Such a sum of cash could be put towards clearing debt, rather than using loans and credit cards to meet outstanding balances.


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Could selling endowment policies help the middle classes?

The average debt of people seeking financial advice from the Citizens Advice Bureau (CAB) has significantly increased over the past 25 years, it has been revealed.

While in 1984, debts of over £3,000 were rare, the average debt of individuals who seek CAB guidance currently stands at £20,000, Joe Michna, the manager of Hartlepool CAB, told Gazette Live.

The average debt in 1984 was less than £1,000 and few people had credit cards, something which could exacerbate the monetary difficulties of households even more.

Chris Radford, chief executive officer of aap - the UK's biggest buyer of endowment polices - said some of its customers had chosen to sell their unwanted endowment policies, rather than surrender them, to shore up their financial standing.

For some CAB employees, 45 per cent of enquiries are about debt. While 25 years ago Britons came for help about debts worth hundreds of pounds, Mr Michna told the newspaper that it is not unusual for individuals to now seek help to clear £50,000 or more.

"I would not have easily foreseen how the availability of credit would increase and the number of options that some people would have including arranging loans over the telephone and on the internet," he stated.

"Nor would I have imagined for a moment that some people would have up to 15 or even 20 pieces of plastic in their wallets which they could use for obtaining credit."

However, middle-class debt is now a serious problem in the UK. Chief executive of Community Money Advice Heather Keates previously revealed that bankers, police officers and teachers are increasingly seeking monetary advice because the recession has pushed their finances "over the edge".

Many middle-class households with high incomes could find themselves struggling with money, especially to stay on top of costs such as paying private school fees and keeping up the running and maintenance of a second or holiday home.

The temptation could be there to use quick personal loans or credit cards to clear previous balances. However, homeowners who have already considered disposing of an unwanted endowment policy for debt management needs may not realise that selling is an option.

Mr Radford from aap said rather than surrendering endowments back to the insurance company, individuals also have an option of selling.

He added that when people sold their underperforming endowments to aap, it always paid them more than the surrender value offered by the insurance firm.


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Harvard Endowment Regroups

Jane Mendillo spent her first year as Harvard University's endowment chief contending with the worst financial crisis in generations. Now she is repositioning the U.S.'s largest endowment in light of hard lessons learned.

Key to her strategy: selling off some holdings in hedge funds, private-equity firms and other money managers to bring more money under the purview of her internal investing staff, which she recently began expanding.

"We are looking to have a greater portion of our assets managed internally over the next few years," Ms. Mendillo, 50 years old, says. "That will allow us to be more nimble, have ...


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Could selling my endowment encourage greener motoring?

Rising petrol and diesel prices could have led many Britons to consider buying a more fuel-efficient car to combat the rising cost of motoring and be kinder to the environment. However not everyone can afford to go greener.

According to the latest poll from TheGreenCarWebsite.co.uk, the cost associated with going green is the biggest obstacle preventing the sale of more environmentally-friendly cars.

Website visitors were asked “What would be your main reason not to choose one of the greenest petrol or diesel cars available as your next car?” and 33 per cent of visitors said that the cost of green vehicles compared to regular car models was the biggest obstacle to selecting a green model.

Despite Alistair Darling’s ‘scrappage scheme’, which provides motorists with a £2,000 discount on new vehicles when they trade in cars that are over ten years old, some families are wary of slipping into debt to buy a newer, greener car.

However, Chris Radford, chief executive officer of aap, the UK's biggest buyer of endowment policies, said some of its customers had sold their underachieving endowments in order to cover the cost of greener motoring.

Some of the most popular ‘green car’ models - the ones with the lowest CO2 emission ratings - cost substantially more than the basic entry level models. In fact, the research found that it could cost as much as £4,760 more to buy the environmentally-friendly model compared to the basic model.

However over the long term, going green could help save money as well as help save the planet as they can be cheaper to run, less expensive to tax and in some areas of the country, cheaper to park.

But help may be at hand for Britons worried about being able to afford a new car. People who have already considered surrendering their unwanted endowment policies to raise the cash to purchase a greener car may not realise that selling their underperforming endowments is another route available, according to Mr Radford, from aap.

He added that should aap decide to make an offer to buy an endowment, it will always pay more than the surrender value offered by the insurance company.

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Foundation Endowments Dipped in 2008, but Giving Rose

Grant makers’ endowments plunged by 26 percent last year as the stock market fell to levels not seen in years, says a new report from the Commonfund Institute.
That was a sharply different picture from the one in 2007, when endowments grew by 9.9 percent. But foundations’ returns still compared favorably to the overall performance of the market.
The report was based on a survey of 221 private foundations and 69 community foundations. The Commonfund Institute is the education and research arm of Commonfund, which manages nonprofit endowments. Last year’s study surveyed foundations that held assets of at least $50-million, but this year, because so many suffered losses that pushed them below that cutoff, the minimum was $10-million.
The foundations’ returns declined by 3.1 percent when calculated over a three-year period, compared with growth of 10.8 percent for the three-year period ending in December 2007. Five-year returns were still slightly positive (2.2 percent), down from 13 percent for the five-year period ending in 2007.
Giving Was Up Slightly
Yet the average share of their funds that foundations gave away increased slightly, to 5.8 percent from 5.5 percent in 2007.
Forty-five percent of foundations in the survey said they had increased their spending by an average of 20.4 percent—five times the rate of inflation.
“These are institutions that, even in hard times, are cognizant of their missions and their responsibilities, and are trying to keep faith with their program grantees and people who rely on them for support,” said William Jarvis, managing director at the Commonfund Institute.
Mr. Jarvis, of the Commonfund Institute, said the investment performance of foundation endowments was roughly on par with that of the educational organizations and operating charities his group had also surveyed. “The big news is that all types of charities were affected more or less equally by the market downturn in the final quarter of last year,” he said.
But wealthier foundations performed slightly better. Endowments of less than $50-million recorded a decline of 28.5 percent, compared with 24.6 percent for endowments worth more than $1-billion.
Only Fixed Income Grew
Declines were reported across all types of investment categories except for fixed income, which grew by 0.6 percent.
Investments in international equities reported the sharpest drop (down 41 percent), followed by domestic equities (down 36.3 percent). Alternative strategies as a whole posted losses of 16.4 percent. Among them, venture capital and private equity performed the best, with losses of 6.2 percent and 7.8 percent, respectively.
Foundations in the study held, on average, 36 percent of their money in alternative strategies, 27 percent in domestic equities, and 16 percent in fixed income.
Alternative investments grew as a share of foundations’ overall endowments in 2008. But Mr. Jarvis said that foundations’ share of funds in alternative investments, which cannot be sold off as quickly as some other types of assets, would probably decline this year.


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Foundation Endowments Drop as Giving Rose in 2008, Survey Finds

As U.S. foundations watched the value of their investments plummet by an average of 26 percent in 2008 due to the recession and stock market collapse, they awarded an average of 5.8 percent of their assets in 2008, compared with 5.5 percent in 2007, according to a new survey from Commonfund Institute, the Associated Press reports.


The Wilton, Connecticut-based institute surveyed 290 private and community foundations and found that while nearly half the foundations reported increasing their spending, by an average of 20.4 percent, 31 percent decreased spending by nearly a third. However, because the value of their assets continued to fall, many foundations announced at the end of last year that they would cut their donations to charitable causes in 2009.


According to the Chronicle of Philanthropy, declines were reported across all types of investment categories except for fixed income, which grew by less than 1 percent. Investments in international equities reported the sharpest drop (down 41 percent), followed by domestic equities (down 36.3 percent). As a whole, alternative strategies posted losses of 16.4 percent; venture capital and private equity performed the best, with losses of 6.2 percent and 7.8 percent, respectively.


Although the endowments of the group of Broad foundations decreased in year-over-year value to $2.1 billion from $2.5 billion, they have rebounded by 10 percent during the first five months of 2009. Spokesperson Karen Denne told the AP that foundation officials are optimistic the markets will continue to improve, but it will likely take several years for the endowments to recover what they lost in 2008.


Commonfund Institute managing director William F. Jarvis told the AP that some foundations surveyed are selling assets and opening lines of credit with financial institutions to ensure that they can meet their 2009 commitments, but foundation endowment managers aren't ready to give up on the stock market. Javis noted: "Our chief investment officer is fond of saying, 'if you want to have no risk, you also have to accept that you'll get no return.'"


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Endowments and Foundations: Still The Smart Money?

In recent months, the financial crisis has raised questions about whether endowments and foundations deserve their reputation as the smart money in the private equity investing community. Sharp declines in public stocks and high allocations to the asset class have left many unable to commit to the asset class, and in some cases have forced them to sell interests on the secondary market.
However, from a pure returns perspective, these institutions may still be able to lay claim to the smart investor label, according to a recent report from Commonfund Institute, the research affiliate of Wilton, Conn.-based asset manager Commonfund.
The report surveyed returns from 290 foundations with total assets of more than $131 billion. It found that private equity returns declined by only around 7.8% in 2008, with venture capital posting a 6.2% decline. That’s much better than the 24.2% overall decline generated by U.S. private equity in 2008, according to benchmarking data published by Cambridge Associates LLC.
“The endowment [and foundation] model as defined by the strategy of investing in less liquid asset classes with the expectation of delivering higher long-term returns, that model is not broken,” said William Jarvis, managing director at Commonfund Institute. “While all markets were seriously stressed by the liquidity crisis last fall, in more normal markets the endowment model will continue to work.”
Private equity also outdistanced public stock performance within foundations’ portfolios. Domestic equity returns fell by 36.3% over the same period, while international equities declined by 41%, according to the study. The sharp decline in public stock values drove down the total assets under management at many of the foundations in the survey so sharply that it prompted the institute to create a new survey category for institutions with $10 million to $50 million in assets, according to Jarvis.
That said, the study also showed how dramatically those public stock declines, combined with the illiquid nature of private equity, have pushed up foundations’ private equity allocations. Overall allocations to private equity on a dollar-weighted basis across all foundations rose to around 7.2% of total assets, compared to a roughly 4.8% allocation in the previous year’s study, according to Jarvis. Allocations to alternatives overall rose to 36% from 28%.
Jarvis said declines in more liquid alternative strategies such as hedge funds, along with a recent push by foundations to redeem portions of their liquid alternative investments, also drove up the relative weighting of private equity.

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