endowment advice please!

fbrander

Have today spoken to my policy holder Norwich Union and the news is not good. Took out a 23 year endowment in 1992 to pay off a £54000 mortgage at £92.83 a month. Current projections show a £24000 shortfall. Have asked them for a final settlement figure and was quoted a measly £14, 608.60. This is only £312 more than I have paid in! Apparently the bonus figure to date of £8600 is in part included in this figure. I am staggered. Have said I want to claim for mis-selling as I had no idea the plan was so risky. Has anyone got advice :mad: on what I should do next? In the event that my claim is not upheld what are my options? I want to convert to a repayment mortgage and be done with the whole mess to be honest.

dunstonh

Current projections show a £24000 shortfall.

Using what rates? A projection is just an example using a specific rate of return. It is not what you will be getting back.

Have said I want to claim for mis-selling as I had no idea the plan was so risky.

Its medium risk.

Has anyone got advice :mad: on what I should do next?

Performance is not grounds for complaint. You have to have a reason why you believe it was mis-sold.

in the event that my claim is not upheld what are my options?

More or less the same if it is upheld. You still have this policy either way.

I want to convert to a repayment mortgage and be done with the whole mess to be honest.

One of the faults with endowments, when compared with modern products, is that they are complicated to understand for the individual. A lot of people have thrown away very good endowments thinking they were bad whilst others are keeping bad endowments. You need to find out which yours is. The figures you have given are not good enough to decide that.

Norwich Union are on the strongest providers out there and their with profits fund is doing very well currently. Recently they increased bonuses again, including terminal bonuses. You have to remember that we are just coming back from a stockmarket crash so everything in the years following is going to appear low. Its where you stand now and looking forward that we need to consider.

The easiest place to start is to see what rate that projection used to give that £24,000 shortfall. It may be unrealistic (resulting in higher or lower potential end figures). NU certainly have the potential for 6% on the NU WP fund. Some of the companies they have bought over the years may not though.
So, what projection rate was that on the £24,000 shortfall and is yours a NU plan or did it start out with somone else?, if so, who?

fbrander

thanks as always for your advice. The shortfall of £24000 was based in April of 2005 on a 4% return as opposed to a 6% or 8% return. I was given shortfall figures for these too but cant remember exactly what they were- sorry.

fbrander

sorry forgot to mention, policy was originally with General Accident Life

EdInvestor

Hello FB

Post some figs on this endowment so we can get a better idea

Guaranteed sum assured
Declared bonuses
Surrender value
Monthly premium
Maturity date

fbrander

Hello Ed
Here we go- Sum assured is £19566 taken out on 7/4/92 on a with profits basis.
Declared bonuses- does that mean total regular bonus? If so it's £8742.00
Surrender value- £14, 608.60
Premiums are £92.83 a month
Maturity date- 7.4.2015
Hope this helps

EdInvestor

If you cashed it in and put the money on deposit @4% also paying in the premiums to maturity yu would end up with 35,311.

You would get a higher return if you use the money to reduce the mortgage.For instance if you pay 5.5% on the loan, and used the surrender proceeds to reduce it and then overpaid using the premiums to maturity, your total return would be 39,746 which is quite a lot better, almost 24% more than their projection ( which is only just over the guaranteed value of 28,308 suggesting this is a pretty poor endowment.)

I want to claim for mis-selling as I had no idea the plan was so risky.

Have a look at www.endowmentaction.co.uk , the Which site, which explains about how to make a complaint based on incorrect attitude to risk.

I want to convert to a repayment mortgage and be done with the whole mess...

I would proceed as follows:

1.Put in claim for misselling if appropriate
2.See mortgage broker and ask him to look for cheapest remortgage option with no overpayment penalties
3.Check into replacement life cover if you need it
4.Surrender endowment
5.Use proceeds to reduce amount of new mortgage and bump up repayments to include both current interest payment and endowment premium
6.Assuming complaint is successful, pay in compensation money to reduce amount owed on mortgage (this is why you want a mortgage with no overpayment penalties)

And watch interest rates to see if they come down and you should remortgage again in future.If they come down, it's quite possible you could make up all of this loss without further outlays. In any case, by doing the above, much of the shortfall will disappear.

fbrander

Dear Ed
You are a star! Have lodged a complaint with Norwich Union yesterday and they will investigate. There was no quibbble from them about this. they also asked me if i wanted to be compensated! I had thought very much along the same lines as you.
At present we have debts of £14530 on 2 car loans. Paying this off with the cashed in endowment would free up £483 a month which could be added to our current mortgage payment. I've worked out I could then switch to repayment and pay it off in 8 years by increasing the monthly payment to roughly £1100. Any compensation could be added later to further reduce the term. Does this sound reasonable?

EdInvestor

FB

Sounds good to me