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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