Act now on mis-sold endowments: new article

treliac

Had we continued to rely on the pension mortgage, we would have been paying into it, along with full interest on the mortgage loan, until I was almost 70 and then what a shock when we realised this and how little there would have been to repay the mortgage loan, it doesn't bear thinking about.

The FOS say they are looking into our complaint and keep sending us loads of forms to fill in. They have twice got our complaint mixed up with an endowment complaint (and sent us the wrong forms) which doesn't inspire us a great deal. They don't seem able to say much else at this stage, seems we have to wait until it gets to an adjudicator.

The most helpful conversation we have had has been with TPAS, who seemed to get a good grip of our situation and explained some points that had eluded us previously. Their belief in our case has helped.

What is left of the pension will probably be of little significance at all. Fortunately, we are both in company schemes that we will be relying on for retirement. I am hoping that we may be able to get the pension mortgage plan rescinded altogether as I have heard this is sometimes possible.

Pension mortgages are so clearly different from endowments, I am still hopeful that Martin might be able to give them more publicity.

Mayb, I am sorry that you have had such a hard time. Have you explored all possibilities now?

treliac

mayb_2

Yes teliac we even complained about the Ombudsman and the way he reached his decision on our case - it was so biased towards the company it was breathtaking. The Ombudsman said he did not have to consider all of the evidence as this was not a court of law. He managed to consider all of the company's 'evidence' and chose to ignore ours -ours was on paper there's were just opinions. When we made our complaint we were told we could not complain about the decision itself only about the process of our case.

We then complained about the company's breach of FSA regulations and were told that our complaint would help the FSA to make sure other people did not suffer as we had done. Nothing for us here though. In the end the Company paid us more than they had originally stated they would and we got our money back. They had been going to give us less than the payments we had made in to the plan. So we got something for fighting this but it wasn't a pension. I wish you the very best in your fight.

dreamylittledream

treliac wrote: »

Lady-Jane, we were sold a similar retirement plan, having been advised this would be the best way to pay our mortgage and have a lump sum left over to help in retirement. We were young and naive; although the name 'retirement plan' implied to us that it was some sort of savings plan. We had no idea nor were we given any information that there was any risk attached and would never have put ourselves in the position of possibly not being able to fully repay our mortgage. This would have literally terrified us.

We changed to repayments some years ago, having feared we wouldn't end up with what we had been told to expect. We have in the last year discovered that we might have a complaint as our mortgage was missold to us (didn't previously make the link to endowment misselling).

We made our complaint to the company that sold to us, using information from this site and from others found on the internet. Some of the compensation claims company websites offer useful info, though I wouldn't ask them to act for us due to unnecessary cost and, I don't think they do anything tailored to individuals' cases, just put in a standard template that you can do yourself.

The company made us a paltry offer that was completely miscalculated, e.g. we should have taken a 25 yr repayment mortgage and redress should have been calculated accordingly. The company calculated it as though we would have taken a repayment mortgage over the much longer term of their plan. Also, regulations make it only possible to have 25% of the plan's value as a lump sum to repay the mortgage. This was implemented after our plan started. No-one told us of the change.

Our complaint is now with the Financial Ombudsman Service. There are a number of issues involved in our case as we have come to realise. I feel that there must be many more people in a similar situation. I have read that there are comparatively few complaints about pension mortgages and can only imagine it's because people are still unaware of what a hopelessly poor position they are in. I hope that, with time passing, others
affected will not be time-barred before they realise their predicament, especially since there are no warning letters sent out in respect of these plans, it seems that providers may not even know when they are linked to mortgages.

So, I would say, go for it Lady-Jane and good luck. I imagine you would claim from the company that bought the first one out. Still having original and relevant documentation can only be helpful.

Hmmm *bites lip* - I don't know what you were offered but if it was based on methodology usually used for endowment complaints I'd have bitten their hand off.

I'm assuming you were offered a traditional RU89 calculation up to the scheme retirement age (which is when you would have taken the pension lump sum). To be honest it would be diffuclt to argue that the term should be any different as this is the point when the mortgage loan would have been redeemed. How else did you understand the mortgage was to be redeemed as the minimum age you could have taken the lump sum would have been 55? Also the maximum tax free lump sum on personal pensions has always been 25% of the fund. Was your plan a RAC or a personal pension?

The advantage with using this method is the 'surrender value' used will be treated as 25% of the current fund value.

Most companies don't know how to deal with pension mortgage redress accurately, but OAC have published some guidance which would allow the firm to make allowances for the significant tax relief you will have enjoyed and also a projected value on the lump sum - i.e multiplied up to retirement age and then projected back down to calculation date.

The bottom line is done in this fashion the chances are no redress would be payable, given the significant effect of the tax relief.

The FOS haven't published any concrete guidance on the issue so your really opening pandora's box on what the individual Ombudsman will believe is appropriate in the circumstances. I'm not sure I'd be hugely optimistic...

Also if you want to pursue it you'll need to go to final Ombudsman decision, the average adjudictor at the FOS struggle with anything other than very basic RU89 redress (try explaining an error in a scenario 7 calc to one.... )

dreamylittledream

dunstonh wrote: »

Yes. You are not alone. Those that complained early in the process after 2002 got really big redress payments. Some of those endowments have now returned to surplus positions and they get to keep their redress.

The system the regulator chose isnt really fair to everyone on both sides.



The calculation method would be different.



There is the argument that you should perhaps get out whilst you are ahead. Especially when you consider you have a Pearl plan. However, you can only be timebarred three years after you have been warned of a high risk of not hitting target (sometimes shown as a red warning).



You say that however, in reality it isnt the case. I did an investment case in 2006 and in 2007 the guy spoke to me on the phone and started accusing me of not telling him something yet I had. I referred him to my report and the copy email he responded to discussing the issue and then he suddenly remembered the conversation and reading. That was just after 12 months.



Why should the assumption be that she is telling the truth? There are far too many people trying it on or have selective memories which are sudden perfect recollection in all the areas that suit them but cannot recall things which would work against them.

I'm not saying this person is doing that but the large number of fraudulent claims, many instigated by the dodgy claims companies, has created a lot of mistrust on some complaints. I know the complaints team at my network know which claims companies are dodgy and they will treat those with more distrust than others.

The innocent parties in this (on both sides) have been suffering due to those that knew the risks, knew what they were doing and have been trying it on with opportunistic complaints.

There have been many calls for the funding of the FOS to change and a number of the proposals include introducing a charge to complain which is refunded if not upheld. So many could just be resolved without the need for complaint if there was just some communication rather than going straight to complaint.

The ironies of this are interesting, although from my experience compensation payments probably peaked in mid 2005 and have been on a downward curve ever since. But turning to methodology RU89 was introduced for two main reasons:

- the majority of upheld complaints prior to this point were offered full refund of premiums with interest and the policy voided (offers by the life companies obviously). This was felt to be unfair as it limited the options of the complainant and (arguably) did not accurately reflect their loss at that time.

- The option to make up any shortfall on policies was largely rejected by the industry as it placed an uncertain figure of monies needed in the future to cover what could have been massive liabilities. On a similar note Zurich is currently attempting to have a judicial review to remove from FOS jurisdiction on some ex Eagle Star business over the meaning of the word 'guaranteed' in their literature at the time on the grounds that the implications for other business it wrote at the time could be massive.

As it turned out some of the worry was for nothing but it could easily have gone the other way. RU89 gave full and final settlement at a fixed point in time with no allowances for future losses entered into knowingly. So although not perfect it was probably the best solution to the problem.

The concept of 'fraudulant' claims is interesting, given much rests with someone's interpretation of what they were told. Also until the mid 90s the majority of paperwork completed at point of sale was couched in financial services terminology, the meaning of which may not have been clear to a lay person. Therefore when you state that a policy was suitable becuase the fact find states their attitude to risk was cautious, it does have to be questioned exactly what the complainant understood by cautious. Few I suspect would attach a meaning of a risk of a shortfall.

You are quite correct however, that memories do fade and indeed some people will claim black is white if they think they can get away with it. However my current experience is that the FOS take if anything a fairly bearish view on suitability. I'm sure many on the receiving end of complaints would disagree - which probably suggests they have the balance about right!

The majority of settlements at FOS are done by mediation at adjudictor level and big firms undoubtedly agree to settle claims for reasons other than the individual case's merits. That in my opinion is one of the reasons the uphold rate amongst IFA's is compartively lower - an individual firm has far more at stake to settle a claim in relative terms than a large corporate body.

That said the worst complaint handling practices I have seen have also originated from small IFA's so it undoubtedly cuts both ways.

Equally I continue to believe there is a fair argument that for the majority of people invetsment linked mortgages were fundamentally unsuitable - a fact seen by their dramatic drop in popularity.

Blaming complaints handling companies for the situation remains a tedious argument. Yes there are sharks out there, but then again there were plenty of them selling endowments also. In general most complaints were gnerated by the media outcry over the past few years, the complaints firms merely played off the back of this, they largely don't insitgate the complaints. That said those firms who prep their clients and delibratley encourage the to lie are of course problematic and should be drummed out of the industry, which hopefully the regulation should assist (although to be fair the regulation is largely fairly toothless).

I very much doubt the FOS will ever introduct fees to the end user (i.e complainant) as it would pretty much defeat its object - which is to allow the consumer an appeal route without the costs attatched to the courts. I sincerely hope I am not proven wrong as introducing fees to the end user will only increase the distrust the general public has for the industry rather than decrease it.

EdInvestor

The company made us a paltry offer that was completely miscalculated, e.g. we should have taken a 25 yr repayment mortgage and redress should have been calculated accordingly.

Like many people who get redress for missold endowments, i fear you have misunderstood.The redress doesn;t meet the shortfall, it just puts you in the same position you would have been in had you taken out a repayment mortgage.

Also, regulations make it only possible to have 25% of the plan's value as a lump sum to repay the mortgage. This was implemented after our plan started. No-one told us of the change.

As mentioned, this has always been the case.

Blaming complaints handling companies for the situation remains a tedious argument. Yes there are sharks out there, but then again there were plenty of them selling endowments also.

One often suspects they are the same people.

treliac

dreamylittledream, thanks for your info. Some of your answer goes over my head as I'm not familiar with the financial terms. I don't know what RU89, RAC or OAC are?

The FOS published their guidance on calculating redress when a pension mortgage has been mis-sold in Issue 56 of the Ombudsman News.

The important point that was not applied to our case is that it should have been compared to a repayment mortgage over 25 years and they used the comparison of a repayment mortgage over 36 years which, of course, would have involved a lot less of the capital being paid off. We would, with proper advice, have taken a 25 year repayment mortgage.

Information we have is that the maximum lump sum to be taken of 25% came into being some time after we took this out in 1986. We were not advised of any change and believed we could use all of it for our mortgage.

Funding a mortgage was the only reason we got involved with this. The idea of having something over and above the mortgage cover, to spend in retirement, was obviously appealing but we were persuaded this would be the right type of mortgage for us and would never have touched it if we had known it was based on any type of risk.

Tax relief was talked about but I've no idea of how 'significant' this was. Anyway, didn't this benefit end too?

I believe what we have is a personal pension. The original title was "Personal Retirement Plan."

treliac

"Like many people who get redress for missold endowments, i fear you have misunderstood.The redress doesn;t meet the shortfall, it just puts you in the same position you would have been in had you taken out a repayment mortgage."

Exactly, this is just what we are looking for, not a penny more, but not a penny less.

"As mentioned, this has always been the case."

Certainly not what we were told at the time. If so, and it has not changed since 1986 as we have been told more recently, this would be another point on which we were mis-sold.

dreamylittledream

treliac wrote: »

dreamylittledream, thanks for your info. Some of your answer goes over my head as I'm not familiar with the financial terms. I don't know what RU89, RAC or OAC are?

The FOS published their guidance on calculating redress when a pension mortgage has been mis-sold in Issue 56 of the Ombudsman News.

The important point that was not applied to our case is that it should have been compared to a repayment mortgage over 25 years and they used the comparison of a repayment mortgage over 36 years which, of course, would have involved a lot less of the capital being paid off. We would, with proper advice, have taken a 25 year repayment mortgage.

Information we have is that the maximum lump sum to be taken of 25% came into being some time after we took this out in 1986. We were not advised of any change and believed we could use all of it for our mortgage.

Funding a mortgage was the only reason we got involved with this. The idea of having something over and above the mortgage cover, to spend in retirement, was obviously appealing but we were persuaded this would be the right type of mortgage for us and would never have touched it if we had known it was based on any type of risk.

Tax relief was talked about but I've no idea of how 'significant' this was. Anyway, didn't this benefit end too?

I believe what we have is a personal pension. The original title was "Personal Retirement Plan."

Sorry for the acronyms - this business is full of them!

RU89 -Regulatory Update 89 - the missive from the FSA which outlined how redress should be calculated for mis-sold endowment mortgages.

RAC - Retirement Annuity Contract - the predecessor to personal pensions. If you took the policy out in 1986 its likely to be a RAC not a personal pension as these were not introducted until later.

OAC - Oxford Actuarial Consultants - think tank who specialise in financial services redress. They offer the main rival calculation programme to Exasoft who created mortgage fundamentals, the industry standard for mortgage endowment redress.

As to your other points - Ombudsman news 56 does give a case study in the manner in which you refer - but it does not form binding precedent. There is a fair argument to suggest that the deferred redemption of the mortgage was knowingly entered into and as such should the pension not have been sold a repayment mortgage may have been arranged over the same term. These are case studies and their application can not be carried to every scenario.

Also why would you have taken a 25 year mortgage when you took a policy knowing you couldn't use the proceeds until you retired. Plenty of people took 30 or 35 year mortgage. The Halifax used to have a product called the 'working life' mortgage. The Ombudsman will need to decide what you would have reasonably done in the circumstances had you not taken the pension.

It is also very vague over the use of 'notional gain' - the monthly cost saving you'd enjoy by using a pension instead of a capital and interest mortgage.

This is significant given that pension contributions are paid gross of tax - i.e you get tax relief up to your highest rate on the amount you pay into the policy. This is a highly significant saving (and the main reason that any pension plan is recommended).

The rules did change significantly when personal pensions were introduced and exceptions for former RAC's remain - this however, would not have been forseeable by the adviser in 1986 and such it would be unfair to hold him responsible for it.

Like I said you may well be entering into a lottery by disputing the redress, pension mortgage redress is far less well defined than endowment mortgage compensation and many of the concepts from pension review may come into play that could seriously reduce any offer made....

dunstonh

I very much doubt the FOS will ever introduct fees to the end user (i.e complainant) as it would pretty much defeat its object - which is to allow the consumer an appeal route without the costs attatched to the courts. I sincerely hope I am not proven wrong as introducing fees to the end user will only increase the distrust the general public has for the industry rather than decrease it.

Actually, what the FSA have proposed is even worse in my opinion.

The proposed "Primary" advice channel is designed for the tied agent/multi tie salesforces. There will be limited ability to complain to the FOS if you see a Primary adviser. Much lower than there is now. At the end of the process the client will effectively self certify that understand the advice. The product range will have to be simplified (stakeholder style) but wont have to be stakeholder cost.

Clients of IFAs will still have FOS protection.

Now, this is daft as salesforces are the cause of the vast majority of all complaints. So, rather than deal with salesforces more harshly, it appears to reduce complaints you take the option to complain away.

No doubt this is so the FSA can say in 5 years time that complaints have dropped significantly since our new proposals came in. A bit like the bank clerk that tells the waiting customer that the bank has found a way to reduce queues at that branch.... close the branch.

The FSA has always been pro banks and the proposals certainly suit the banks more than any other.

I know its fashionable to have a dig at IFAs (although if research is correct, most people dont appear to know the difference between IFAs or tied agents or assume their tied agent is an IFA). However, the fact is that IFAs in general work to a higher standard and give better advice than tied agents. Perhaps more so now than 5-10 years ago. Still some improvement can occur and that could be down to the number of tied agents that were made redundant 5-10 years ago who moved into the IFA role but are still acting like tied agents. There are also some dinosaurs that need retiring off quickly as well. Hopefully the new exam requirements will see to those.

treliac

Thanks d-l-d, I think the answer shows in your last post.

Why would we have taken this? Obviously not with awareness of what we were doing, which was not conveyed to us by the salesman.

I ended a 25 yr repayment mortgage in favour of this (at the point of moving house). Why on earth should we have wanted knowingly to continue paying interest on the full capital for 36 years, when we could have cleared our mortgage in 25 years. We were able to afford whichever type of mortgage was best for us. Doesn't make any sense at all does it? Why should we have 'chosen' to take on a debt that would have continued 10 years after I had hoped to retire. What would I have been able to pay this with?

We didn't want it as a pension and froze it when we subsequently changed back to repayments. We knew by then it was no good for us. It's only recently that we have understood the issues around mis-selling - thanks in large to this site. We have also become aware of how much more this whole mistake is continuing to cost us throughout our lives.

So we will continue with our complaint in the hope that the outcome is a just and fair one.