Got a letter about an old endowment policy...

Bleurgh

I was mis-sold an endowment policy in 1995 by Allied Dunbar. I eventually cashed it in in 2005 because I needed the money and I got hardly anything for it at all.

I'd paid into it for 10 years although it was only small amounts - the payment was ony £47 a month - so I paid into the policy about £5600. When I cashed it in I cant remember what they gave me but it was about £2000.

At the time they gave me the opportunity to complain which I did. I told them that I had been mis-sold the policy. They rejected my claim saying that I had put in my complaint too late.

Anyway - I've moved house twice since then and they have tracked me down. They sent a letter to my previous address saying that they have revisited the complaint and would I phone them to confirm my details.

So I phoned them yesterday and verified my details. They are sending me an offfer of compensation but didnt say how much. I was hoping someone here could give me an idea as to what I should expect and if its too low, what I should be asking for?

When I took out the policy, the projected growth rate was between 9 and 11%. As I said before, I cant remember the exact figure I got when I cashed it in but lest say it was £2000. I'd paid in £5600.

Applying a reasonable growth rate of 8% per annum with payments of £560 per year I should have expected my £5600 to become £8761.34 based on the following calculations...

Year 1 value £560 growth at 8% £44.80 total = £604.80
Year 2 value £1164.80 growth at 8% £93.12 total = £1257.92
Year 3 value £1817.92 growth at 8% £145.43 total = £1963.35
Year 4 value £2523.35 growth at 8% £201.87 total = £2725.22
year 5 value £3285.22 growth at 8% £262.82 total = £3548.04
year 6 value £4108.04 growth at 8% £328.64 total = £4436.68
year 7 vaue £4996.68 growth at 8% £399.73 total = £5396.41
year 8 value £5956.41 growth at 8% £476.51 total = £6432.92
year 9 value £6992.92 growth at 8% £559.43 total = £7552.35
year 10 value £8112.35 growth at 8% £648.99 total = £8761.34

So the policy at 8% should be worth £8761.34 assuming that i paid into it for exactly 10 years at £560 per year.

At the very least I should expect them to pay me back everything I paid in. So the minumum I expect to be compensated is £5600 minus the £2000 I already got for cashing it in. So that should be a minimum of £3600. However, i think its fair to say that if I hadnt been mis-sold the policy, I could have expected to invest my £560 a year into something else that could have provided me a return of 8% so therefore I should expect them to compensate me more than just what I paid in.

Does this sound about right ?

dunstonh

At the very least I should expect them to pay me back everything I paid in

That only happens on voided policies so that is unlikely unless your complaint was about a pre-sale endowment. If it was the usual complaint about not going with endowment if you had known there was a risk then they will pay the difference between where you were with a repayment mortgage against where you were with the interest only mortgage and endowment.

However, i think its fair to say that if I hadnt been mis-sold the policy, I could have expected to invest my £560 a year into something else that could have provided me a return of 8%

Be careful saying that to them. They could reverse their complaint decision as it indicates that you were willing to take investment risk and your complaint has been upheld on the basis that you were not.

so therefore I should expect them to compensate me more than just what I paid in.

Does this sound about right ?

No. They will use the defined calculation method and will pay you what you are entitled to. No haggling or discussion over the amount. That will be what you are due (unless the input figures are wrong).

Bleurgh

Thanks for your reply.

As it happens, the letter arrived very quickly, I picked it up just now. Theyve offered me just over £3000 and I'm very happy to take it.

Yes, the complaint was that I wouldnt have taken it on if I knew it was such a risk - the pushy salesman who sold me the policy kept repeating over and over - "its guaranteed to pay out the full amount". It seems they must have had complaints from other people about this dodgy salesman otherwise I dont know why they would suddenly contact me out of the blue having already rejected my complaint.

They based their offer on the difference between using a standard mortgage against the endowment and came up with the above figure. I'm happy because in the end I will get back pretty much all that I paid in and I wasnt expecting to hear form them so its been a nice surprise.

dunstonh

It seems they must have had complaints from other people about this dodgy salesman otherwise I dont know why they would suddenly contact me out of the blue having already rejected my complaint.

Its possible. Trends are looked for in complaints. More likely though they found someone that was checking cases was rejecting cases that should be upheld and all their cases had to be checked again by someone else.

the pushy salesman who sold me the policy kept repeating over and over - "its guaranteed to pay out the full amount".

They weren't known as Allied Crowbar for nothing

EdInvestor

Bleurgh wrote: »

It seems they must have had complaints from other people about this dodgy salesman otherwise I dont know why they would suddenly contact me out of the blue having already rejected my complaint.

The FSA (the regulator) has been forcing companies to reopen old cases where they wrongly rejected misselling complaints, that's the reason.

dreamylittledream

For those that are interested Zurich lost a long running battle with the FOS a few months ago over the ex Allied Dunbar policies which used the word 'guaranteed' in their product literature and whether these products could be timebarred becuase of this clause.

The OP will probably fall into this case load as Zurich have also had to revisit cases that had not been been FOS registered.

Bleurgh

Interesting stuff. I have a further question...

The acceptance slip asks me to sign that I...

"Understand the compensation should be used to reduce my outstanding mortgage."

Currently I dont have a mortgage. Is it referring to the old mortgage associated with the policy?