Selling endowments could help those households from falling further in the red

During the third quarter of 2009 Britons borrowed an average 32 pence for every pound saved, the highest level of borrowing for the year, a new study has revealed.
Chris Radford, chief executive officer of aap, the UK's biggest buyer of endowment policies, said some of its customers had decided to sell their underperforming endowment policies and start clearing their debt, rather than turning to further credit to see them through the economic downturn.

Many households relying on credit during the recession

The poll by Unbiased.co.uk found that saving levels have also dropped. During the second quarter of the year £19 billion was saved by Britons, but this declined to £13 billion during the third quarter.

With less money put to one side, people could find that large expenditures are less able to be covered and, as such, personal loans and credit cards could be relied upon to cover the cost.

Debt levels have not reduced in order to accommodate this decline in saving. They are now almost double what they were at the start of the year.

This could mean that many households will have to tackle climbing debt repayments in 2010.

Chief executive of Unbiased.co.uk Karen Barrett said: "After the dramatic retreat from savings in favour of paying off personal debt in the first half of 2008, consumers are now slipping back into old habits, by borrowing around a third of what they save."

She added that with "savings levels currently billions lower than they were back in 2006 and 2007, this is creating a serious barrier to a sustained economic recovery".

Selling endowment policies could help get households back into the black

Mr Radford, from aap, said some of its customers who wanted to get their household coffers out of the red had decided to sell their unwanted endowment policies so they could make headway into clearing debt.

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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Could selling endowment policies offer financial security?

Households keen to start a family may want to make sure that they can provide their children with the financial security that they need in order to enjoy a comfortable upbringing.

A study conducted by National Savings & Investments (NS&I) reveals that 64 per cent of Britons think financial security is important to put in place before considering starting a family for the first time.

With the suggested annual cost of raising a child being around £25,000, many would-be parents could find this figure hard to save in order to give their child the kind of start in life they hope for.

Chris Radford, from aap, the UK's biggest buyer of endowment policies, said some of its customers with children, or who plan to start a family in the near future, had decided to sell their underperforming endowment policies so that they could raise the cash required to help with family costs.

The £25,000 figure is the annual income that many Britons believe is necessary to cover the cost of raising a child, according to the research, while the majority (78 per cent) list money as a deciding factor behind the number of offspring that they choose to have.

However, for 12 per cent of respondents, an annual household income of between £40,000 and £70,000 is suggested as being necessary before it becomes reasonable to have children.

NS&I savings spokesman Tim Mack says: "Starting a family is always going to be much more than a purely economic decision."

But he adds: "Britons are also considering their financial future when deciding on the number of children they will have."

On average, men were keen to put in place more of a "financial cushion", typically wanting a sum of £27,000 to pay for bringing up a baby, compared with women's general desire of £23,000 as a monetary safety net.

Mr Radford, from aap said some of its customers have decided to sell their underperforming endowment policies in order to address their current financial standing and make their family finances stronger for the future.

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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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.



WANT TO KNOW MORE?
Guide: Endowment mis-selling
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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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