Close Brothers has unveiled a bank loan product which lets people with endowments that have two to five years to run to take out a secured loan against their policy while still retaining their life cover and right to claim their terminal bonus.

Minimum loans are £5,000 and the maximum is £40,000.

Research undertaken for the launch of Close Brothers Endowment Loans, which pays out an immediate lump sum against an endowment, indicates endowments worth up to £5.6 billion could be cashed in early.

It shows 18% of with-profits endowments customers in a sector worth £30 billion are planning to cash their policies in early which would mean missing out on any terminal bonuses and life cover. FSA figures show around 2.5 million with-profit endowment policies are in force with customers paying in an estimated £166 million a month at an average of £66 a month.

Around 31% of people with endowments are unhappy with the performance of their funds but unsure whether to keep paying into the policy. Around 72% of financial advisers questioned by Close Brothers say clients with endowments from stronger performing endowment providers should not cash in.

The performance of with-profits funds varies widely from 10-year funds with average growth rates for 2011 of -3.3% to 25-year funds with average growth rates of +16.8%, and payouts at the weaker performers are expected to keep falling.

People who surrender policies to life companies generally receive on average between 3% and 15% less than those who trade them, according to the Association of Policy Market Makers. But both lose the rights to any terminal bonuses and life cover.

Close Brothers’ research shows 41% expect terminal bonuses to rise over the next three years compared with 25% expecting them to fall. 32% of advisers say clients cashing in endowments in the past year did not have alternative life cover.

John Taylor, commercial director of Close Brothers Retail Division, said: “We believe that up to a third of endowment customers are unhappy with their policies and around a fifth are planning to cash in early so clearly there is considerable concern about the future of endowments.

“With more than 2.5 million policyholders and £30 billion invested in the sector there is a real need for more options for customers choosing between continuing to pay into their endowment or selling or surrendering early.

“Our endowment loan product enables customers to reduce monthly outgoings while receiving a lump sum now and retaining life cover and the right to terminal bonuses and a further payout following repayment of the loan.”