Endowment mis-selling

jimbush

I have recently complained to the L & G about being mis-sold an endowment, and have received an offer back. Their offer is to either completely buy back the policy (surrender value plus compensation), but this equates to approximately what I have paid in, or they have offered me a sum of money that equals about 4% of my total mortgage which I am thinking of taking but would like the views of any readers whom have had offers as I was not sure what to expect.

L & G agreed that the endowment was totally against our request for a zero risk mortgage hence the compensation, but failed to agree that the salesman did not highlight the fact that the policy may not meet its target as he had put it on his sheet, which is all well and good, but at the time we questioned him about this and he said he had to put this on by law but ignore as the policy will make thousands because of the then flying stock market etc etc, but unless these sales pitches had been recorded how can we prove what the salesman said or not said.

I have found L & G to be very good with my request. They have responded in quick time, they have been curteous and understanding in their phone calls they sent all literature I requested. As above I didn't know what level of compensation, if any, and was wondering about what other readers had received etc.

EdInvestor

Are they offering to put you in the same position as you would have been in if you had taken out a repayment mortgage?

If so the amount of compensation is correct.

Surrendering the policy or not is a different issue. Post some figs about it so we can check it.

Guaranteed sum assured
Declared bonuses
Surrender value
Monthly premium
Maturity date.

jimbush

Dear Edinvestor,
In 2004 they sent a projected illustration of how my plan would perform, I require £28000 to cover my mortgage.

4% = 21700 6% = 28000 8% = 36200

They say the difference between balance of an interest only mortgage and the balance of an equivalent repayment = 2589
The extra cost to meof having an endowment = 58
Net interest on the above total to date = 241
Refund of all premiums paid since interest-only mortgage ended= 1285

The current surrender value = 3188
I have paid premiums of £53 for approx 7 years. There is approx 18 years left to go.

As in previous post I am confused over what they are offering, and how this compares to other claims

EdInvestor

Jimbush

If you took the surrender value and put it in the bank @4% also paying in the premiums until maturity you should end up with 23,120 (more than the projection and no risk.)

If your mortgage interest payment is higher than 4% then you'd be better to use the compo money and surrender proceeds to reduce the mortgage amount owed and increase the monthly mortgage payment by the amount of the endowment premium.This should bring you very close to your target if not beyond.

jimbush

Thanks Edinvestor,
That is some quite simple, sound advice that I hadn't thought of, but now you have spelt it out for me it gives me food for thought.

It just highlights how poor the returns are for quite a large risk. To return slightly above a good building societies interest rate, which as you point out is zero risk, just doesn't seem worth it to me. I think with a bit of thought I could quite easily outperform this policy.

Thanks again!

Jimbush

dunstonh

That is some quite simple, sound advice that I hadn't thought of, but now you have spelt it out for me it gives me food for thought.

Although it may not be as simple as that. There are a range of variables which are not taken into account which could influence the outcome. There has also been no consideration for alternative fund solutions, if any available and no checking of paid up options or penalty free exit points.

It just highlights how poor the returns are for quite a large risk.

Its medium risk and over the long term, the returns will average out what you expect for medium risk investments of that era. It is certainly not a high risk fund. As it happens, had it been high risk, you would have done better over the long term but would have seen wild flucuations in the interim periods.

To return slightly above a good building societies interest rate, which as you point out is zero risk, just doesn't seem worth it to me.

Long term average with L&G is likely to end up around 2-3% p.a. above building society. Short term fluctuations are likely with any investment.

I think with a bit of thought I could quite easily outperform this policy.

Always easy to say that with hindsight. I would bet that if you picked an investment strategy to beat it, yours would be higher risk. However, you would have suffered larger losses at various times so it would have been interesting to see how you woul have reacted in the short term when that happened.

Ed isnt really comparing like for like when looking at 4% into a bank account. After all, not many are giving 4% net. Plus the potential for the L&G is closer to 6%. Then there is the life cover built into those premiums which ed has chosen to invest rather than re-allocate to life cover. That would reduce the "building society" figure down further.