All our with-profits contracts, whether regular savings or lump sums; for life or a set term, can be cashed in. An exception is savings plans in their first year, where encashment is only permitted for welfare reasons (eg for unexpected medical costs). There is no surrender value on protection policies (eg Mortgage Protection Assurance, Income Protection).

Generally, surrender values remain at our discretion, so we are able to react to adverse experience in the investment markets. This can lead to a loss arising when policies are encashed in the early years. With this caveat, we do not expect to return less than your premiums on lump sums – including ISAs paid on a monthly basis. On other regular savings plans, “endowments”, we normally refund the premiums paid, less one month’s premium in the second and third years, and with no deduction in the fourth and fifth years.

For regular savings policies held for 5 years or more, what we pay on surrender is closely modelled on equivalent policies that are maturing. However, we do make a small deduction for our costs, investment risk, and the higher death benefits.

This is a point to consider when choosing the term of your endowment plan. It is more flexible to choose a longer term and retain the option of early encashment. We do not have the ability to vary the term of an endowment once chosen.

Moreover, terms of 10 years or more are “qualifying” endowments – which means no liability to higher rates of tax on the profit provided held for 10 years (7 1/2 years in the case of a 10 year endowment plan). Note that we pay savings rate tax (20%) on all plans, except our Tax Exempt Plans.

Plans which mature after 5 years, or are encashed at that time, are subject to tax on the profit at your marginal rate, with credit for what we have paid.