Response to my mis-selling complaint

Amanda65

Hi all, just to re-cap we have complained about being mis-sold our endowment mortgage in 1988 which was declined by Windsor Life but upheld by the ombudsman. At the time I had to write back to the ombudsman saying that I would accept Windsor Life' s offer even though I did not know what this was at the time. I have today received a letetr from WL to say that if we surrender the policy now we are £4157 better off than we would have been at this stage with a repayment mortgage and therefore there is no compensation to pay! We don't want to surrender the policy now though - we are not in a position financially to covert the mortgage to a repayment and presumably any life cover we now have to take out (aged 40 and 44) would be higher as well. The whole point of my complaint was that the policy will not pay off the mortgage at the end of the therm. Help please! Do I have to surrender my policy now (I was told on the telephone by WL some time ago that I wouldn't have to) and if I keep the policy is that it - do I just have to accept that the endowment won't repay my mortgage?

dunstonh

I have today received a letetr from WL to say that if we surrender the policy now we are £4157 better off than we would have been at this stage with a repayment mortgage and therefore there is no compensation to pay

That is not unusual. Endowments were cheaper than repayment mortgages for much of the time. Also, the assumption that all endowments are bad is incorrect. An endomwent can be above track to pay a mortgage off and still get a shortfall letter due to the failings of the projection system.

The whole point of my complaint was that the policy will not pay off the mortgage at the end of the therm

Says who?

we are not in a position financially to covert the mortgage to a repayment and presumably any life cover we now have to take out (aged 40 and 44) would be higher as well.

You are £4157 better off than you would have been on a repayment mortgage.

Do I have to surrender my policy now (I was told on the telephone by WL some time ago that I wouldn't have to)

No, you dont have to. However, Windsor Life are quite correct by including in the surrender value. The choice to surrender or not is yours. You need to decide what to do. It may be worth seeking independent financial advice because your position is very desirable currently but it would be worth checking the future potential of that endowment and it's funds against. It may be worth keeping it. It may be worth switching investment funds to alter the porfolio. It may be worth surrendering it now, paying that off the mortgage and paying the £75-£150 fee to switch to repayment mortgage.

You have complained about an endowment policy being mis-sold which is performing (to date) above track and now you are complaining about it being a good endowment and putting you in position of being £4157 better off than you would have been had you been on repayment mortgage. In a way, you have to feel sorry for the advisor that sold this policy. At this point in time, his/her advice has put you in a better position than a repayment mortgage. Yet you have complained about it.

Amanda65

Windsor Life have told me that I am not on target to repay the mortgage - their current predictions are a £20k shortfall on a £73k mortgage. And how can I possibly be better off? This is all a paper money exercise and does not get away from the fact that the poor FA that sold us the policy (sorry - I am unable to share your sentiments ) told us that not only would we pay off our mortgage but that we would be able to have this lovely lump sum to see us into our retirement!

I appreciate that we are £4k better off at the moment than we would have been with a repayment mortgage but we would have paid that mortgage off at the end of the term and not had a shortfall.We are not is a position to remortgage as my husband has been made redundant.

moneysaver

dunstonh wrote:

You have complained about an endowment policy being mis-sold which is performing (to date) above track and now you are complaining about it being a good endowment and putting you in position of being £4157 better off than you would have been had you been on repayment mortgage. In a way, you have to feel sorry for the advisor that sold this policy. At this point in time, his/her advice has put you in a better position than a repayment mortgage. Yet you have complained about it.

Surely the OP is not interested whether it is performing better at this point or not. When the policy was taken out it was to pay off a mortgage after the full term of the policy & bonus' at the end of the term. It was not taken out with the OP looking at a potential shortfall, or it would have been absolutely crazy to do this.

I would have thought at the time the banks would not lend on this type of mortgage if they thought this was a risky investment.

With so many endowments shortfalling why should the investors have to suffer these losses. If they were told of this at the outset I am sure the endowment would not have been so popular & the financial advisers would not have got the big commissions.

The whole point on taking out an endowment was for it to reach the target amount.


Moneysaver

Amanda65

Thanks Moneysaver - this was my understanding. There is no way anyone would buy into something that they did not think would repay the mortgage - I was naive at 23, not stupid - and in my naivity assumed that the FA was giving good advice

dunstonh

Windsor Life have told me that I am not on target to repay the mortgage

No they havent. They have told you that using three growth rates (usually 3,4 & 5%) that you will have a shortfall. The fact your endowment is over £4000 more than a repayment mortgage suggests that it has been performing at a higher rate than those.

The projection system is highly flawed and should not be the only source of information you use when deciding if the endowment is on track. I have seen many endowments with shortfall projections go on and pay out surpluses. If you also have the original illustration available, you can compare the surrender value against the same point on the illustration. Many will be above target against the illustration but lower on the projection.

An endowment needing 7% average p.a. over the term will always show a shortfall when 3% is used as a projection rate. If the fund is only doing 3%, then that is a good guide. If the fund is does 8%, then it will pay out a surplus. You will still get the shortfall projection though.

I appreciate that we are £4k better off at the moment than we would have been with a repayment mortgage but we would have paid that mortgage off at the end of the term and not had a shortfall.We are not is a position to remortgage as my husband has been made redundant.

Well, if that is your current view, then switch to repayment mortgage and be happy that you are 4k better off.

Surely the OP is not interested whether it is performing better at this point or not. When the policy was taken out it was to pay off a mortgage after the full term of the policy & bonus' at the end of the term. It was not taken out with the OP looking at a potential shortfall, or it would have been absolutely crazy to do this.

Well, if that is the case, I will switch the mortgage to repayment, pay the charges and take the 4k for myself!!! That way the OP gets the guarantees they want and it would have cost them no more or no less. Of course the performance is important. That relates to the level of compensation.

With so many endowments shortfalling why should the investors have to suffer these losses. If they were told of this at the outset I am sure the endowment would not have been so popular & the financial advisers would not have got the big commissions.

Had endowments not been cheaper than repayment mortgages, then many consumers would not have chosen them. The vast majority of the ones I sold were done on the basis that they were £10-£20pm cheaper than repayment mortgages and that was the priority. The risk was highlighted and, in my case, clients signed a document showing the comparison and they wrote why they chose that option.

Although I do not doubt a significant number were sold without warnings. I also know that a significant number were sold correctly and consumer greed was the priority. If more advisors, at that time, had taken more care with their documentation, there would be considerably less compensation payouts.

There is no way anyone would buy into something that they did not think would repay the mortgage - I was naive at 23, not stupid - and in my naivity assumed that the FA was giving good advice

At this point in time, the advice that the FA gave you has put you in a position where you are £4000 better off than the alternative you now wish to be on. You are not entitled to any compensation because you are better off. If the complaints proceedure was fair, you should now be writing out a cheque for £4000 to the FA which he should keep.

If you wish to switch to repayment, you can do so. If you don't want to, then you don't have to. Some may say you have been lucky to have such a good endowment up to now.

moneysaver

dunstonh wrote:

Had endowments not been cheaper than repayment mortgages, then many consumers would not have chosen them. The vast majority of the ones I sold were done on the basis that they were £10-£20pm cheaper than repayment mortgages and that was the priority. The risk was highlighted and, in my case, clients signed a document showing the comparison and they wrote why they chose that option.

Although I do not doubt a significant number were sold without warnings. I also know that a significant number were sold correctly and consumer greed was the priority. If more advisors, at that time, had taken more care with their documentation, there would be considerably less compensation payouts.

Are you sure it was not FA greed that missold the policy's?

dunstonh wrote:

At this point in time, the advice that the FA gave you has put you in a position where you are £4000 better off than the alternative you now wish to be on. You are not entitled to any compensation because you are better off. If the complaints proceedure was fair, you should now be writing out a cheque for £4000 to the FA which he should keep.

You keep on refering to THIS POINT IN TIME it is not this point in time she is interested in. She was given a guarantee at the outset & now this is not forthcoming. It is a copout from insurance company's & also the FSA guidelines letting the general public down.

Maybe the insurance company's were too quick in the early days to give high projection figures or was this a way to sell more policy's.

Moneysaver

dunstonh

You keep on refering to THIS POINT IN TIME it is not this point in time she is interested in. She was given a guarantee at the outset & now this is not forthcoming. It is a copout from insurance company's & also the FSA guidelines letting the general public down.

You can only refer to the position as it stands now as that is only factual bit of information we have.

The complaint proceedure has decided that it was a mis-sold policy. Fair enough. However, the calculation to see where the OP should be had a repayment mortgage been chosen has shown that she is actually over £4000 better off.

Therefore, if she switches to repayment mortgage now, the mortgage will be paid off at the end of the term and she gets to keep that £4000. The was insufficient evidence to say she wasnt given a guarantee and the insurer is saying she can switch to repayment mortgage now knowing that she is financially better off at this time for doing so. What is wrong with that and how can you call it a cop out?

Maybe the insurance company's were too quick in the early days to give high projection figures or was this a way to sell more policy's.

The regulator set the projection rates used. The insurance company was able to set the target growth rate and most used the middle rate. As it happens, long term performance figures still suggest that figure will be sufficient for the average balanced managed fund (which most unliked endowments will be in). Its With Profits funds which offer limited future potential.

Are you sure it was not FA greed that missold the policy's?

Read my post again. I said that certainly did occur. However, I know of people that went to IFAs with the Which report and told them they wanted an endowment and chose the Which best buy. I know clients that chose endowment as they knew people that had big maturities. I know clients that chose endowments because they were cheaper. You cannot just point the finger at financial advisors. The greed situation works both ways.

Greed is possibly a part to play in this thread now. The insurer has said the policy would provide £4000 more than is currently needed to switch over now. Yet the OP wants more.

Amanda65

Dunstohn - I'm sorry have I really upset you at some point? I feel quite personally attacked by your comments today. I am not a greedy consumer, just one who feels that I was taken in by the promises of an FA of good returns on the money I was investing and who, like many others , woudl not have undertaken to take on this type of mortgage had I been warned that there was any possibility of the mortgage not being repaid. By nature my husband and I are both rather cautious investors. I only wish that my FA was as diligent and honest as you obviously were with your clients, then I might not be in this situation.

You again mention remortgaging but I don't know if you had taken into account the comment about my husbands current emplyment (he was made redundant 2 months ago) I do not know of many lenders who would consider us a particularly good risk at the moment.

All I am concerned about is the £20k that I may not be able to repay at the end of the term. And as for WL not telling me my endowment won't perform why are they still regualrlybombarding me with letters telling me to take out another policy to cover the shortfall?

moneysaver

Quote:
Are you sure it was not FA greed that missold the policy's?

dunstonh wrote:

Read my post again. I said that certainly did occur. However, I know of people that went to IFAs with the Which report and told them they wanted an endowment and chose the Which best buy. I know clients that chose endowment as they knew people that had big maturities. I know clients that chose endowments because they were cheaper. You cannot just point the finger at financial advisors. The greed situation works both ways.

Greed is possibly a part to play in this thread now. The insurer has said the policy would provide £4000 more than is currently needed to switch over now. Yet the OP wants more.

I can see you mention consumer greed but I don't see you mention FA greed.

Moneysaver

Somerset

dunstonh

I've asked you a couple of questions on endowments already. I'm confused about something and I suspect many other posters are too. You say ( for example ) that an endowment may still pay off a mortgage, or even give a surplus, even though policyholder's are getting shortfall projection letters. I understand the market may improve and that projections are only that, projections ie based on future performance. But how then can an individual 'work out ' whether what their position will be at the term end. I've been reading these threads lately. Some funds/companies are doing better than others or have a better reputation - there seems to be a question with terminal bonuses ( which can be anything ??? ). How can someone ' not in the business ' actually make an informed decision here ?? It feels like a secret club that non-members can't infiltrate.

Just out of interest - my monthly endowment/interest payment was more expensive than the repayment option.