Ending your endowment or whole of life with-profits policy early

If your statement shows your with-profits policy isn’t worth what you expected – or you need to access your cash before the term is up – you might be thinking of cashing in your policy early or even selling it. Here are some things to consider when deciding what to do.

Things to consider before ending your policy

If you think you were mis-sold an endowment

Top tip

If you are worried about making the decision on your own then it might be sensible to get some financial advice.

In this case, you may be able to complain to the provider before you sell or cash in and may be entitled to compensation. But check whether you’re within the time limits for making a complaint. Find out more on the Which? website.

Read more in Sort out a money problem or make a complaint.

The rest of this page looks at options for where you don’t think you were mis-sold the policy.

What happens if you end it early?

It usually costs you something to end a policy early, but how much that is depends greatly on:

  • whether your policy is an endowment or whole-of-life policy
  • how long you’ve been paying into the policy – if you end a policy in the early years you may get back less than you paid in

To make sure you’ve got all the facts, ask your financial adviser or policy broker about:

  • what bonuses or guarantees you’ll lose by cashing in early.
  • what penalties and market value reductions (MVR) there will be if you end it early, and whether it would be better to keep it – your adviser can give you an estimate of what your policy might be worth if you hold on to it until it ends
  • what happens if you keep the policy but stop paying any further premiums
  • whether there will be a tax liability if you cash in or stop paying premiums

Once you know what’s at stake, ask yourself:

  • am I willing to lose this money?
  • does it make financial sense to cut my losses here?
  • what financial goal was I trying to reach with this policy and am I still trying to reach it?
  • is there another investment that can better help me reach my goals?

Your options if you decide to end your policy early

If you’ve decided that ending your policy early is the right decision for you, you need to think about how you want to exit. There are two possible ways to end a policy, but they’re not all available with every policy. You can:

  • cash in the policy
  • sell the policy to a third party

Make sure you understand the implications of ending your policy – fees, charges or reduced payouts – for whichever choice you make.

Talk to your provider about the cost and effect on payouts of ending your policy early.

Stopping payments

  • Some policies offer the option to stop making payments. This is called making your policy ‘paid up’.
  • With a paid up policy, your insurance company will continue to hold your funds until the maturity date but you’ll get back less at the end of the term than if you had kept paying in.
  • If your policy includes life insurance, its value will probably be a lot smaller if you stop your payments.

Cashing in your policy

  • With this option, you stop your policy early and get a cash-in (or surrender) value.
  • There are usually high charges and exit penalties when you cash in a with-profits policy. The company may apply a market value reduction or adjustment (called a MVR or MVA) when you cash in. This is to make sure you don’t leave the fund with more than your fair share.

Selling your policy

  • If you have a with-profits endowment policy, you may be able to sell it on the second-hand endowment market.
  • If you’ve been paying in for at least seven years, you’ll probably earn more if you sell a with-profits policy rather than cashing it in.

Remember to consider any guarantees you may lose, any charges and the possible cost of replacing any life insurance cover.

Talk to your adviser or provider about the implications of selling.

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