Pru endowment - urgent help needed!!

Teetoo

Hi there,

I followed the complaints procedures with the Pru who have since admitted mis selling an endowment to me and offered me c£3k in compensation. I understand how this figure has been calculated, i.e. compared what has been paid to what would have been paid on a repayment mortgage.

The shortfall is predicted to be c£17k and, (as is the case with 1,000s of others), I was "promised" a large surplus. I appreciate that the offer would put me back to the position I would have been in had I taken out a repayment mortgage but it does nothing to address the missing "surplus". I was a naive 21 year old at the time I took out the mortgage and did not make any pension provisions as I would be receiving this surplus fund in my mid 40's.

I have been in communication with the Pru, asking more questions and explaining the situation but they have not budged in their offer. They imposed a deadline of a few weeks for me to accept the offer by. But this deadline has now come to an end.

My questions are:
1) I do not want to accept the offer. Is their deadline enforceable? I.e. can I still pursue this through the courts even after their deadline has passed?

2) Can I accept their offer and still pursue through the courts for the remainder of what I believe is owed?


3) Does anyone think that I have an inkling of a chance to fight this with the help of a solicitor? (If anyone can recommend a solicitor that would be even better).

I have spent hours (and I mean hours) researching this and reading all of the regulations etc on the internet. I know about the FSA guidelines etc but I wanted to know if there is anything that can be done outside of these guidelines.

Guys, I really need a swift reply on this as if I am to meet the deadline, I really need to do something today.

Thank you so much.

dunstonh

I followed the complaints procedures with the Pru who have since admitted mis selling an endowment to me and offered me c£3k in compensation.

You lucky so and so. With Pru having a 100% success rate on hitting target with their endowments you have got a free £3k

it does nothing to address the missing "surplus".

Why should it?

I was a naive 21 year old at the time I took out the mortgage and did not make any pension provisions as I would be receiving this surplus fund in my mid 40's.

That is naive. However, that is not the fault of Pru. Even if the old economic situation had been maintained and big surpluses were still being paid, the real terms value would be low so you wouldnt have gained as much as you think anyway.

I have been in communication with the Pru, asking more questions and explaining the situation but they have not budged in their offer. They imposed a deadline of a few weeks for me to accept the offer by. But this deadline has now come to an end.

Pru are using the defined method of calculation and are correct to stand firm on that.

1) I do not want to accept the offer. Is their deadline enforceable? I.e. can I still pursue this through the courts even after their deadline has passed?

You can still go to court but expect to lose. There have been very few successes in court. Mainly as the requirements to prove a mis-sale are a little different and you need to prove mis-sale whereas currently the Pru (under FSA requirements) have to prove it was a valid sale. That slightly favours you whereas court slightly favours them. The court will put weight on the illustration that was issued at the time which would have shown three projection rates. One of those is usually in a loss position, one at break even and one at surplus.

Plus, we havent hit maturity yet. You are assuming a shortfall that may not exist. Many very good endowments have shortfalls on the projections but go on to pay surplus amounts (most of Prus as it happens).

3) Does anyone think that I have an inkling of a chance to fight this with the help of a solicitor? (If anyone can recommend a solicitor that would be even better).

Not a hope in hell. I would expect a solicitor to tell you that its not worth the costs involved for the very slim chance of success. Especially as you are relying on example projections which tend to understate on the good plans and on the basis that the maturity hasnt occured yet. You are not financially worse off from the product so there is nothing in law to say you should be paid any more money.

In my eyes you have got a very good result here as you are getting:
1 - £3k paid out
2 - probably had lower monthly payments on your mortgage (most endowments were cheaper than repayment mortgages)
3 - a good chance that the Pru policy will end up in surplus. So far all Pru endowments have (even Scot Am ones are running in high 90% range with 98.2% expected to hit target this year).

Dick_here

So as I read it, dunston, the bottom line is that the Pru policy will almost certainly pay out more than enough to cover the mortgage. If only everybody else had a Pru policy eh...

EdInvestor

Teetoo wrote: »

I appreciate that the offer would put me back to the position I would have been in had I taken out a repayment mortgage but it does nothing to address the missing "surplus".

The surplus was not guaranteed - nor for that matter was repayment of the mortgage, though they have admitted fault on the latter front under the misselling guidelines (not the same as the law).

1) I do not want to accept the offer. Is their deadline enforceable?

Yes, and the compo is based on a set formula, so is not negotiable.

I.e. can I still pursue this through the courts even after their deadline has passed?

Yes.

2) Can I accept their offer and still pursue through the courts for the remainder of what I believe is owed?

Yes

3) Does anyone think that I have an inkling of a chance to fight this with the help of a solicitor? (If anyone can recommend a solicitor that would be even better).

If it's a small claims track case, it may be worth a try, if it's more than that I wouldn't bother as they will fight you and you will probably lose and end up with a bill for costs.

I would accept the offer immediately.

Now post some information about the policy so we can see what else you can do to make up the shortfall.( You can forget about the surplus).

Guaranteed sum assured
Declared bonuses
Surrender value
Monthly premium
maturity date
maturity forecasts

Interest rate payable on mortgage.

Getting misselling redress is only half of what you need to do to fix duff endowments.

Teetoo

Dunstonh - thanks for your reply - I have read many of your posts on here and know that you are an IFA. I understand that you would see the point of view of the insurance companies.

Regardless of what the illustrations said, the adviser truly oversold the policy based on the surplus funds I would receive. There are literally 1,000s of people out there who were sold their policies on this premise - do you not think this should be taken into consideration when calculating the compensation?

dunstonh wrote: »

3 - a good chance that the Pru policy will end up in surplus. So far all Pru endowments have (even Scot Am ones are running in high 90% range with 98.2% expected to hit target this year).

Mine was a Scot Am policy and whilst your figures seem nice and high, that would be based on the years of bonuses paid whilst the market was riding high...what about over the next 5-10 years when we may be in for a more rocky time?

Teetoo

EdInvestor - thanks for your response.

You say that "Yes" I can accept their current offer and still pursue the rest through the courts. The Letter of Acceptance I have to sign says that I am accepting their offer as full and final settlement. Are you sure by signing this it would not jeopardize future claims on the same policy?

dunstonh

I have read many of your posts on here and know that you are an IFA. I understand that you would see the point of view of the insurance companies.

I dont see the view of the insurance companies at all. Indeed, I have placed complaints on behalf of clients a number of times and have usually been successful. However, I do look at it from both angles and take a balanced view. Its far too fashionable to slag off banks and insurance companies but I wont buy in to that just to gain brownie points for other posters. I prefer to work on the facts.

Regardless of what the illustrations said, the adviser truly oversold the policy based on the surplus funds I would receive. There are literally 1,000s of people out there who were sold their policies on this premise - do you not think this should be taken into consideration when calculating the compensation?

No. You have no proof of what was said. If you did, then Pru would have taken that into account. Proof is key with complaints and with court action. What proof do you have that you were told there would be more?

The insurance company would provide copies of the illustrations to the court which used FSA approved rates. What have you go to prove that higher rates than those were used?

There are four truths with most of these things. What you said happened, what they said happened, what actually happened and how that is interpreted.

The FSA complaints process puts the burden of proof on the advising company to show that it was the correct advice. The majority of complaints are not upheld. Even the majority of those that do pay out are not upheld but paid out on the basis of insufficient evidence. Usually because files or missing or the documentation is not strong enough (which doesnt mean a mis-sale took place but they are unable to proof it one way or the other).

Mine was a Scot Am policy and whilst your figures seem nice and high, that would be based on the years of bonuses paid whilst the market was riding high...what about over the next 5-10 years when we may be in for a more rocky time?

They are not my figures. They are the published figures from Pru.

2004 - 89% of endowments hit target (of those falling short, the average shortfall was £890)
2005 - 95% of endowments hit target (of those falling short, the average shortfall was just £49. The average surplus was £2409)
2006 - 96% hit target (average shortfall for those falling short was £700 and average surplus £2600).
2007 - 98% hit target (average shortfall for those falling short was £518 and average surplus was £3348).
2008 estimate - 98.2% expected to hit target with average suprlus of £2280 and those falling short, average shortfall will be £362

Bad years of performance can be painful on those maturing in the short term but can be beneficial for those going for the long term. Especially on unit linked or unitised with profits plans.

You probably only got a payout because the surrender penalty and early charges automatically put the endowment into a worse position than the current value. That is very often the case. I have seen many endowments that are above track based on their original illustrations but are below track on the current example projections. That is due to the changes in the illustration method and the flaws in the way they are used.

Teetoo

Thank you for your considered response.

Back in the late 80s do you think that it is fair that the adviser could sell you a pack of lies as long as the small print told the "truth"? Nowadays everything has to be evidenced and there would be little chance of such a scandal happening again. Nothing was sent to me to read prior to signing on the bottom line - I went into their offices, they produced the paperwork and sold me this wonderful product...I must have been an easy target at being so young.

You are right, I don't have physical proof...only the testimonials of 100s of 1,000's of people who were told the same thing. Does this not count for anything?

Peter999_2

You will have also received a cancellation notice through the post giving you 21 days to cancel if you were not happy.

I was 20 when I took out my endowment and even though the advisor didn't tell me, I actually read the documentation of the policy which made it quite clear that the sum assured was only guaranteed on my death. The projections on the quotations clearly state what percentage increase was required each year to make those figures, and that past performance of the company was no guarantee of future performance. My policy has a shortfall which I've not happy with, but I took the gamble and lost.

When I go to the bookies I don't expect to be refunded as it wasn't made clear to me that I could lose my money if my horse doesn't win.

dunstonh

Back in the late 80s do you think that it is fair that the adviser could sell you a pack of lies as long as the small print told the "truth"?

I would go as far as the mid 90s actually. I don't think most told outright lies. They just used the data they had and put a positive spin on it and and failed to highlight the warnings.

Also, you have to remember that the media and even the consumers association/Which? were pro endowment back then. No endowment had fallen short and large surpluses were common. I believe complacency was the real problem not malice on the part of the individuals.

Nothing was sent to me to read prior to signing on the bottom line - I went into their offices, they produced the paperwork and sold me this wonderful product

Playing devils advocate and assuming its a post 1988 case the response to that will be that their process was that you were issued with an illustration and key features document. They were also sent again in the post to you with your cancellation rights.

You are right, I don't have physical proof...only the testimonials of 100s of 1,000's of people who were told the same thing. Does this not count for anything?

Despite the widespread nature of the endowment issue, the majority of complaints are not upheld. So, using other people's cases to support your own isn't likely to go far. you could have two individuals working for pru. One follows their processes correctly and not a single case gets upheld. Whereas another is a wide boy and most of his get classed as mis-sold. Pru would state what their process was at the time and assume that the person followed it unless you can provide evidence to the contrary. Of course you may get lucky and find Pru cannot provide any evidence or not enough evidence.

We were given stats a while back to show that out of average 1000 cases 25 were genuine mis-sales. However, another 225 had to be paid out on because of missing documentation or in adequate documentation. The rest were not upheld or paid out on. Its the 225 where most people are successful and the insurance companies and advising companies only have themselves to blame for that because they didn't look after their records well (never been a need to before) and didn't put much weight on the quality of what was written on them first place. When data protection act first started to bite, I was a lowly employee back then and I had the task of destroying all documents that were over 6 years old because it was thought that they could not be kept. What a bad decision that was. Not only was it wrong but it has also cost companies a lot of money.

You have to think of what your evidence is and what you are asking for. At the moment you have no shortfall and your complaint was handled on the basis that had you known the risks you would not have taken out an endowment. Pru have agreed with you and are paying you a sum to put you in the position as if you had been on repayment from the start. If you go to court you cannot argue that point because Pru have agreed with you and are paying up. Your argument seems to be that you want a lump sum on top and that would suggest you were willing to take the risk and endowment was the right option for you and that could backfire on you with a careful range of questions asked of you.

EdInvestor

Teetoo wrote: »

. The Letter of Acceptance I have to sign says that I am accepting their offer as full and final settlement.

That's of the misselling claim, right?

Are you sure by signing this it would not jeopardize future claims on the same policy?

It's best if you check with a solicitor.But I would stress, if the amount you are trying to get is more than comes under small claims (around 5k last I saw) IMHO you should not proceed, as they will fight the claim.This is because small claims don't set a precedent, larger cases do. If you lost, you would get landed with the Pru's costs, which would be quite likely to include a QC's fees.

My experience of endowments is that many people were aware that the surplus was not guaranteed but was a likely extra benefit of the endowment. What people weren't aware of was that the endowment might fall short of paying off the mortgage. This is where the misselling arises, as they would not have taken out the policies if they thought this was the case as they did not accept this risk.

Are you in this position?