Act now on mis-sold endowments: new article

mayb_2 · 19 November 2006 at 9:51PM

Thanks Crazy Saver I will nip there now.

GJAL · 20 November 2006 at 11:19PM

Following the chat forums on MSE, we decided to pursue a claim with FSCS for a miss-sold endowment from 1989 against a now defunct IFA. The endowment is with Scottlife, finishes in 2014 and has a projected shortfall of £31K

That claim has now been upheld, but what is astonishing is the amount of compensation offered, a pitiful £650 (obviously not as yet accepted).

This seems to be as a result of a deduction of £10.5k, this being what FSCS call a notional gain from lower outgoings when comparing an interest-only + endowments mortgage over a repayment + decreasing term assurance mortgage.

It seems to me that anyone with a claim upheld by the FSCS will receive these very small offers, as these miss-sold endowments mortgages will always have cost less than a repayment over the same period, because these endowments were sold on that basis to look more attractive to the punters, but with the promise they would pay-off the mortgage.

Do I have any recourse to either FSCS or someone mentioned perhaps The Financial Ombudsman.

Also anyone else out there with a similar story.

mayb_2 · 21 November 2006 at 12:26AM

Don't know if it helps but we had a projected shortfall of about 25,000 and received a settlement of just under 17,000 if I remember correctly - we had the offer checked by an IFA to ensure it met the FSA guidelines and it did. (I think it was the FSA but they may have been Government guidelines). Anyway the point is there is an accepted system of working these things out that is supposed to put you back in the position you would have been in, if you had taken out a straight repayment mortgage. This isn't called compensation though.

This sounds very low so it might be worth contacting the FSA to see if they can advise you how to check this out. Also I don't remember the actual amount we paid for our mortgage as being cheaper - we took it at the time because we were told it was the only mortgage that offered a fixed rate for 2 years and this was at a time when mortgages were going through the roof. We paid 13% instead of the 15% operating at the time I think. Once the two year period was up though we were paying more than the going rate. The endowment policy itself cost a fair bit but we were told to cancel our mortgage insurance as this would now be incorporated into the endowment policy and this would make it more affordable. This was sold to us in 1991/2.

Could be that compensation claims are treated differently as the IFA has gone out of business, but you should have been advised (along with the offer) that you could take your claim to the Ombudsman if that was possible.

dunstonh · 21 November 2006 at 10:57AM

That claim has now been upheld, but what is astonishing is the amount of compensation offered, a pitiful £650 (obviously not as yet accepted).

So, at this stage you are £650 financially worse off.

This seems to be as a result of a deduction of £10.5k, this being what FSCS call a notional gain from lower outgoings when comparing an interest-only + endowments mortgage over a repayment + decreasing term assurance mortgage.

Which is fair enough. Most of the time endowment mortgages were cheaper than repayment mortgages plus you have to take into account the surrender value of the endowment.

Do I have any recourse to either FSCS or someone mentioned perhaps The Financial Ombudsman.

FOS is no help to you and whilst you can query the figures with the FSCS if you think they are wrong, chances are they are not and this is what you are entitled to.

If you take the redress, surrender the endowment and switch to repayment, that will put you in the financial position you would have been had you gone with endowment in the first place.

It could be that the projection is not a realistic value for the real performance of the endowment or it could be that there isnt a big surrender penalty on the endowment and that has increased the value used to offset the redress.

GJAL · 21 November 2006 at 8:55PM

Well no I think I'm about £10.5K worse-off.

This being the difference between me now surrendering the Endowment paying this off the existing capital balance there by reducing it to about £37k
and what the capital balance would have had it been on a repayment, which FSCS have projected as £25k

The FSCS calculation deducts what it calls savings this being the notional benefit of paying lower overall costs the £10.5, but that assumes that since 1989 I've been putting these notional savings to one side. Surely the whole point of claiming redress for miss-sold endowment policy and I agree is to put you in the same position with a repayment mortage, but all their calculation has done is is left me with the existing shortfall to date which by the way is about £10.5k.

Sorry to go on a bit,, I'm a bit new to this chat business. The feedback is much appreciated.

mayb_2 · 21 November 2006 at 11:06PM

http://www.fsa.gov.uk/consumer/01_WARNINGS/endowments/mn_compcalc.html

The above link will take you to the part of the FSA website where they give an example of how compensation is worked out. I hope it is of some help. The Which site is also very useful for information on endowment misselling and gives examples of compensation received. For what it is worth I don't think you should accept this without a fight and I can't see why you can't take it further if you are not happy.

defender_of_the_weak · 22 November 2006 at 9:20AM

The FSCS, unlike banks etc, will deduct the notional savings and the offer is as it stands. There is no one to blame but your IFA or adviser for doing this to you in the first place. Unlike farepak no one will rally round on national tv raising money for your loss. Rough message but time to move on and plan ahead

marie_Taylor · 23 November 2006 at 11:04AM

Can anyone help me, i was misold an endowment 18 years ago, i sold the endowment in 1995 as it wasn,t reaching its target, i was given a pittence for it so lost out on that as well, i still have details of endowment can i still claim.

formby · 26 November 2006 at 10:41PM

I worked for the Prudential !!!. Co. for 18 yrs, retiring throught ill health in December 1994. During this period, based on company information, my wife and I purchased a mortgage endowment in May 1993.
In March 2000 the Prudential wrote to us indicating that the policy may not meet our needs. They suggested a number of immediate actions we might consider taking, one of which was to increase the premium on the existing policy. This we discussed and decided to add a further £25 per month, the premium increasing from £99.08 to £124.08 monthly.
Since march 2002 the Prudential have on at least two occassions cut the bonus rates. Taking the increase in premium and reducing the bonus rates appears to be something of a double hit to my mind and this gas been eating at me for some time.
I have therefore decided to place this before you for you opinion, which would be welcomed.
The Prudential's last bonus statement, shows the policy reaching its desired amount with a possible excess of £2500, if it achieves a 6% continuous growth. However from May 2000 until maturity in May 2010, we will have paid in extra premium, a total of £3000. The Pru currently appear to be £500 up at our expense.
Could this be at least a moral miss-sell .

Formby

dunstonh · 26 November 2006 at 10:54PM

Could this be at least a moral miss-sell .

You worked for them which means you probably have no protection at all as you are unlikely to have taken it on advice basis but execution only. (which is how many employee policies are done). The upside is that you got your endowment cheaper.

This we discussed and decided to add a further £25 per month, the premium increasing from £99.08 to £124.08 monthly.

Not bad at all is it. Your monthly morgtage cost would have dropped big time and you only had to increase by £25. Very good value.

Since march 2002 the Prudential have on at least two occassions cut the bonus rates.

You may not be aware but there was a stockmarket crash in 2002.

The Prudential's last bonus statement, shows the policy reaching its desired amount with a possible excess of £2500, if it achieves a 6% continuous growth.

No surprise. 100% of Prus with profits endomwents have hit surplus to date.

However from May 2000 until maturity in May 2010, we will have paid in extra premium, a total of £3000. The Pru currently appear to be £500 up at our expense.

You dont say the size of the endowment but judging by the premiums you would have been on average £20pm better off than a repayment mortgage over the whole term. Plus your endomwent would have been discounted and thats probably worth another £5pm-£10pm over the term.

Could this be at least a moral miss-sell .

Highly unlikely to be a mis-sale. You are unlikely to have sought advice and would have done it on discounted terms because no advice was sought. You would have been financially better off on endowment each month and your endowment is on track to provide a surplus of £2500.

If every endowment holder was in your position, we would still be selling endowments (or modern versions) today and there wouldnt have been this issue.

Act now on mis-sold endowments: new article

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