Will the interest rate decision affect selling an endowment?

The Bank of England yesterday confirmed that interest rates are to stay at 0.5 per cent this month. Aside from this, the Bank also confirmed it is to extend its quantitative easting programme by a further £50 billion.

While the Bank of England has now kept interest rates at 0.5 per cent for months, steps are being taken in other areas to try and improve the country's economy.

A low interest rate may be beneficial for some borrowers, thanks to the effect it has on commercial banks' interest rate charges. However, while low rates may ease the pressure for some, others may have taken steps to reorganise their mortgage borrowing.

Some people with underperforming endowment policies have chosen to sell their policy in order to reorganise their borrowing, said Chris Radford, chief executive of aap, the country's leading buyer of endowment policies. Others who had considered disposing of their underperforming endowment may not have realised that selling the policy is another option that may be available.

Mr Radford said that should aap decide to make an offer to buy, it would always pay more than the surrender value.

Lower interest rates may have helped consumers struggling with interest payments to some degree, although other efforts are being made by high street banks to repair their balance sheets.

Some may be restricting the availability of credit, the Bank of England noted in its statement confirming yesterday's decision.

While this may bring long-term benefits for the state of the nation's economy, individual consumers looking to make changes to their mortgage and debt arrangements may face a degree of difficulty.

However, different options are available. Some customers who were looking to rearrange their household borrowing because of an underachieving endowment policy chose to sell rather than surrender their endowment as part of their financial restructuring efforts, Mr Radford said.

Besides the interest rate remaining the same, other factors are affecting the current state of the economy. Consumer prices index inflation fell to 1.8 per cent in June, 0.2 per cent below the target level, helping to put less pressure on the purse strings.

The Bank has extended its asset purchase scheme by a further £50 billion to £175 billion - a move which the Bank believes will help to create stability in the medium term.

The full effect of this programme on the state of the national economy will take time to become apparent.

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Selling endowments 'could help with school fees'

Many local authorities in Britain are experiencing a shortage of school places, with one main reason being put down to parents taking their children out of private education because they cannot afford the fees.

The number of school places required to accommodate youngsters will need to increase in the long term because of a rise in birth rates, the Local Government Association said.

However, it also noted that in the short term, many mums and dads are unable to pay private school fees because of the current economic downturn. Some parents are placing their offspring into state schools instead, further reducing the number of places available.

Chris Radford, chief executive officer (CEO) of aap - the UK's biggest buyer of endowment policies - said parents who had already considered an endowment policy surrender also have the option to sell their policy to a secondary market maker such as aap, rather than surrender the policy to their insurance company.

The problem of state school shortages is particularly noticeable in London, which houses a number of private schools including Abercorn School, Bales College and Gower House School.

London Councils previously announced that during this financial year, more than 2,250 children will be without a reception place. This will increase to more than 18,300 by 2014.

"Changes in London's demographics, combined with the impact of the recession, have led to an extraordinary rise in demand for new reception places, leaving many schools with little or no capacity to take on new pupils," London Councils said.

While the government announced £200 million of funding to build new primary school places across the UK, the group asserted that London alone needs £740 million to ensure every five-year-old has a reception place over the next five years.

Parents who are struggling with the private school fees of their children may not want to take their youngsters out of a private establishment, given the shortage of state school places.

However, the current economic climate may make it difficult for them to continue to pay the fees, which are expected to rise once again to offset higher costs that need to be met by private schools.

One way to meet the cost of private education could be for parents or grandparents to release the cash in their endowment policy, rather than needing to dip into savings or disrupt their children's education.

Aap CEO Mr Radford said Britons who had already considered surrendering their unwanted endowment policies to raise money may not realise that selling is another option.

He added that should aap decide to make an offer to buy a policy, it will always pay more than the surrender value offered by the insurance company.

Mr Radford continued, adding that a child’s education is always an important decision for any family. "So ensuring you get your financial arithmetic right could help give your child the best start in life."

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