Before surrendering your endowment – always investigate the market value

If you're going to surrender a with-profit endowment policy, why not establish its market value first? - you can get a quote here.

Life Offices - the company which sold you your endowment policy - differ in the way they consider surrendered policies. Some will offer a fair value for your policy, but other life offices put a penalty on a customer who wants to surrender early. This means that the policyholder will not get the best value for their policy when surrendering. Even if the life office makes an offer without a penalty, the open market could offer you more value for your policy.

Buyers of endowment policies take a different view when considering how much they want to pay for a policy. They look at the earning potential of the policy within a balanced policy portfolio. Our contacts market your policy to all the known endowment policy buyers. This ensures you get a realistic offer for your policy - the difference between the surrender value and the market's offer can be up to 40%. Our contacts will negotiate between interested buyers to get you the best offer.

Selling your policy – is your endowment policy tradable?

The market in second hand endowment policies (SHEPS) or traded endowment policies (TEPS) deals exclusively with a type of endowment policy known as “With Profits”. To know whether your endowment policy is “With Profits” look at the last bonus statement. If it mentions units, it is probably a Unitised or Unit Linked policy, if bonuses are in sterling and there is no mention of units then it is probably a traditional With Profits. The other types of policies - “Unit Linked” and “Unitised With Profits” have a performance factor which is dependent directly on current investment market conditions. These are not tradable as there is no real buyers market for them.

Selling the policy to the market – why us?

Most if not all buyers of endowment policies who you receive direct offers from will be buying their policies on behalf of institutional investors, private investors or sales lists. Those institutions (banks, investment companies) or individuals each have a specific set of policies they are interested in, which together achieve a balanced policy portfolio.

What this means is that once the policy purchaser has fulfilled its quota of a specific policy type, they will stop buying that policy type. Even if you have a policy which is highly tradable, by going direct to only one or two policy purchasers you are not ensuring you get an offer at all and even if you do get an offer it may be that you could have received a higher offer had you offered your policy to the entire market.

Similarly, not all brokers are the same. Some brokers will only deal with a few policy buyers whom they have got to know over time whilst other brokers are financial advisors who deal in a number of financial products besides endowments and don’t know the market at all well.

We are using a brokerage that offers your policy to the full range of policy buyers. This guarantees you the greatest interest in your policy, which in turn should get you the best value offer.

The traded endowment market

The market in second-hand traded endowment policies has existed since the first public auction in 1843 and until relatively recently policies were sold mainly through regular auctions. At the end of the 1980’s a renaissance happened in the market, between 1989 and today the TEP market has rocketed in yearly turnover from £5 million to more than £500 million. This phenomenal increase in turnover has been brought about by the very strong demand for Traded Endowment Policies (TEPs) not only from UK and offshore individual investors but also from pension funds, specialist investment trusts and offshore investment funds.

The traded endowment market exists because most people who take out endowment policies do not hold them until maturity - many are surrendered in the early years. Most policyholders will surrender or sell their policy because of changing circumstances. Reasons for selling include alterations to mortgage arrangements or divorce.

Endowment policyholders are now aware that they often receive a higher return when selling their policy on the second-hand market, rather than surrendering it back to the insurance company. This has meant more endowment policies are available on the open exchange then ever before. And the demand for good endowment polices is palpable.

Frequently asked questions about selling endowments

How do I know if I own an endowment policy?

During the eighties and early nineties, endowment mortgages were the popular method of financing a mortgage.

If you mortgaged your home through an endowment mortgage then you will have had an endowment policy.

What endowment policies do you buy?

Only with-profits endowments and there is no minimum surrender value or minimum term.

What can I do if my endowment policy is not a full with-profits?

If you are certain that your policy is not a with profits policy, we cannot sell it.

How do I establish if my policy type is with-profits or unit-linked?

Check your annual policy statement or bonus notice - if it mentions units at all then it is unit linked.

If it mentions bonuses as an amount in cash and adds them to the basic sum assured, then it is with-profits.

Unit linked with-profit policies also mention bonuses, but usually in the form of percentages or bonus units.

Only with-profit policies sell on the second hand market.

More Information on with-profits endowments

A with-profits endowment policy is a contract written by a Life Assurance Company to pay a fixed sum (called a basic sum assured), plus accumulated bonuses that are declared annually, to an assured person, on a fixed date in the future (or to his/her estate if he/she dies earlier), provided that the premiums have been paid as contracted.

How long does it take sell an endowment?

Once you have accepted an offer to sell your endowment, it normally takes between 4 to 7 weeks to complete.

When can I expect to receive my money?

You will receive a cheque for your policy as soon as all necessary clearances have been obtained by the Market Maker. The time taken will be dependent on many factors, and often it may be the life office which is taking the time. For more information please see "The endowment sale process" below.

What will I need when selling my endowment?

The original policy document, proof of identity, address and age. The broker will guide you through the process of selling your endowment.

When am I committed to an offer?

The deal is subject to contract until you have signed the relevant documentation, and sent it back to the market maker's TEP transfer agents. Only then are you committed to proceed with the policy sale.

The endowment sale process

Overview

The process from valuation to completion normally takes approximately four to seven weeks. This will vary depending on the workloads of your Life Offices and the policy purchaser (Market Maker).

There are four stages to the selling process -

• Valuation
 
• Accept the offer, the sales contract
 
• Confirmation checks of policy details and titles
 
• Change of Title & Completion

Valuation

The first step is to send your endowment policy details through our online form. In addition to your endowment policy documents you will need to obtain the current ‘surrender value’ of your endowment policy and the name of the company that sold you the policy. This information can be obtained over the phone from your Life Assurance Company.

The brokers will then establish those policy buyers who are interested in the policy after which they will contact each party to negotiate, to see if they can obtain more value for your policy.

Once they are in a position to provide you with an offer for your policy, they will contact you with the details of the offer and discuss how they can assist you with the successful sale.

Then it's decision time, you need to decide whether you’re better off holding onto your policy or if you want to sell it. With some policy buyers there is a grace period of a week to 14 days to let you make that decision, however the trend is rapidly moving to on the spot quotes where an offer made is only secured for a very short period.

If you decide not to sell, you can always come back to receive another quote. They also have software systems which will rate your policy against market conditions so if a policy gets a better offer at some later time, their system will flag it up and they will call you.

The endowment market changes it demand almost daily, so a policy which was highly tradable today may not be tomorrow, there is no way of foreseeing which policies will be popular in the future. This is due to a number of factors, including life office bonus rates and market supply and demand.

The sales contract

If you decide to go ahead with the sale of your policy you will be issued with an acceptance slip by the policy purchaser. From this point onwards you will be dealing with the policy purchaser's solicitor. In some cases an acceptance slip will be sent you to sign in order to proceed with the sale. In other cases only a contract note will be issued as the next stage –The offer on the contract note will be guaranteed for a specified period of time in which you are able to decide on your chosen course of action.

On the contract note there will be an agreed date for the ‘purchaser’ to take over the premiums. The ‘purchaser’ of the policy will be responsible for reimbursing the ‘seller’ with any premiums paid after this date should they have been paid by the ‘seller’. The premium reimbursements will be paid to the ‘seller’ at the same time that the sale proceeds are paid.

If you choose to accept the offer you simply sign and return the contract note and the attached letter of authority, this will enable the policy purchaser's solicitor to contact the life office to obtain any relevant information regarding the transaction. The solicitor will then write to you to request any further documentation that is required i.e. the policy document and proof of identity.

Once you have signed a contract, it is a binding legal document and you are then obliged to sell your policy at the stated offer, subject to the policy purchasing Terms of Business.

You will then receive a cheque for the agreed amount within a week. You have no fees to pay as the buyer covers the cost of the sale.

Once the policy has been sold, it remains in place on your life, but the new investor pays premiums for the remainder of the term and benefits on your death or at maturity.

Our contacts operate on an ‘execution-only’ basis and so are not able to advise you. If in doubt you should obtain advice from a qualified independent financial adviser. It’s is always worth filling in your details just to see if you would be better off selling your policy rather than surrendering it back to the life office.

Confirmation checks of policy details and titles

At this stage the solicitor acting on behalf of the Marker Maker (Policy Purchaser) will check with the issuing life office that the policy details are correct, and importantly that there have not been any amendments that they were not previously made aware of. An example of this is that the policy cannot be held as collateral against a loan. The solicitor will also conduct a bankruptcy search on the policyholder(s).

Change of title & completion

Once all the checks are completed and there are no issues found, the policy is then prepared for reassignment, the purchaser will issue a cheque to the solicitors. The policy will then be reassigned at the same time as a cheque being issued to the seller. The cheque and the policy have now been exchanged and the change of title is complete!