Act now on mis-sold endowments: new article

treliac

Retired_I.F.A. wrote: »

As far as I know, redress puts you back in the same position as if you had taken on a repayment mortgage in the first place. Yours I think you have previously said was a pension linked mortgage so lets say it was done over 32 years for a figures sake as it was likely to coincide with retirement. Should the complaint be upheld then the redress should put you in the position you'd now find yourself in if you had taken on a 32 year repayment mortgage.
However had the salesman who convinced you to change lets say a typical 25 year original term mortgage to a 32 year one then the redress would be as putting you back into that original term.

What term you chose switching back to repayment is your choice and does not come into it.

p.s. Wish i'd sold you that pension linked mortgage, you'd have understood it and laughed at those that took on endowments, then and now.

Thanks for your reply Retired IFA – much appreciated. We did cancel a 25 yr repayment and take the pension mortgage advice, which, without our having clocked it at the time, meant we would be paying interest for 36 yrs and we are contesting this advice.

I realise we made some tax benefits (though don’t know to what extent, we were only basic rate payers) but we also paid into the pension fund (believing we could use it all to repay the mortgage) and we paid life insurances too (okay, so we would have probably had to pay those whatever). Anyhow the point I am trying to make is that this wasn’t a cheap option and we were not looking for one.

When we changed back to a repayment mortgage several years ago, we effectively started from scratch in paying interest on the whole loan via another full repayment mortgage. So we’d been paying all that interest for 13 years and then had to start again as though we hadn’t paid any previously. We are going to end up having the mortgage for over 30 years anyway, due to this.

That is the bit I am unclear about in terms of how redress should be calculated because to put us back to the position we would have been in if we had taken a capital + interest mortgage originally, it would seem to me that we should have the capital we would have paid on the first set of years back plus the excessive interest we have already had to pay on the second set of years back so that it can now be paid off the existing balance? We can’t even take anything from the pension fund to help out as we are not due to retire for many years, nor could we use much of, it as we’ve now found out, anyway.

I hope my thinking makes sense even if it is wrong, but the extent of financial disadvantage to us over our lifetime seems huge and our options now seem minimal?

So I’m intrigued as well. How would we have done so much better had you been around when we were being given mortgage advice?

Thanks again, treliac

P.S. I see you answered me at nearly 4am this morning. When do you sleep?
P.P.S At least I’m not asking you to spell endowment again!!

mayb_2

Treliac I really feel for you in this horrid situation - I do hope you win through with this one.

treliac

mayb wrote: »

Treliac I really feel for you in this horrid situation - I do hope you win through with this one.

That's so kind of you mayb, thank you very much.

I do feel aggrieved and will continue to do battle on this. I still think there must be many others out there who still don't know they are on a path to nowhere with their pension mortgage.

I would be keen to get involved in an organised challenge to the FOS if enough people feel that decisions are unreasonably biased and based on technicalities rather than the general principles behind mis-selling that persuaded them to buy an interest only type mortgage in the first place.

As ever, mayb, your support is invaluable,

treliac

Retired_I.F.A.

Im going to answer this in stages i think.

Part one: Redress

Having spent at least 100 hours learning completely how a loss is calculated when it comes to pension transfers I knew the intricases pretty well once as did any IFA who was ordered to do a loss assesment and did not pay someone else to do it. A loss assesment involving a mortgage is just as complicated and a pension linked one even more so. It really is in the realms of an actuary and they have to study for 7 years to call themselves one.

No IFA has ever had to calculate a loss involving an endowment mortgage the regulatory body does it with software which includes the interest rates over the period fom the specific lender and that software, written by people just as clever as if not actuaries must have cost many many thousands. (the software for the pensions review took years to write and cost in excess of a million or maybe 2 I forget now)

So if/when offered redress you really have to assume it's fair and the figures input into the software were correct. As the old saying goes, "computors dont make mistakes computor operators do." You can ask for a recalculation which would effectively check the input but to question the result would mean proving it to be wrong and that would set you back far more than your mortgage as to do so would need you to have such software yourself.

Part two: When do I sleep?

When my body decides to shut down

Thing is not working and living alone sure throws your body clock into another dimension. Thankfully I roll my own cigarettes nowadays as the rolling tobacco is somehow different. I've fell asleep on the setee and found fags on it when I wake that would have burned down the house had they been ordinary fags.
Made a new years resolution last year only to ever smoke when standing up. If i dont keep it I'm toast for sure one day.

Part three: Spellin

My spelling is lousey. Note I'm too idle to look up atroshus.
Fiar do's though most of my posts are edited, after I've used a spellchecker.

Part 4 : Wish I'd have sold it you.

Let me come back to you on that one. Basically it's a matter of educating people and assesing their attitude to risk once educated. It takes time, and to explain in a post what I did do over perhaps 3 say two hour sessions with a client would entail writing a book. Let me think of how to summarise it.

Crazy_Saver

Retired_I.F.A. wrote: »

Part three: Spellin

My spelling is lousey. Note I'm too idle to look up atroshus.
Fiar do's though most of my posts are edited, after I've used a spellchecker.

Part 4 : Wish I'd have sold it you.

Let me come back to you on that one. Basically it's a matter of educating people and assesing their attitude to risk once educated. It takes time, and to explain in a post what I did do over perhaps 3 say two hour sessions with a client would entail writing a book. Let me think of how to summarise it.

If only all FAs and IFAs were like you Retired I.F.A.:A

p.s. Life's too short to worry about spelling-that's if your spelling is as awful as mine of course (that's what the funny abc button on my screen is for I think!!!). I'm quite good at maths though;)

treliac

Yes, I see what you mean and thanks again Retired IFA. You see, if you had done all that, you wouldn’t have made the sale I’m afraid because we would have said, “Well, thanks a lot but we need the security of knowing that working hard all our lives is going to pay off our mortgage without any doubt.

And that’s probably why the risk factor was not addressed because many, ordinary, people like us would have done just that and all those FAs wouldn’t have made all the money they did off the back of endowments, pension mortgages and the like. This doesn’t apply to all, I fully understand, but still most people wouldn’t find risking their home to be acceptable.

Your honesty is a blessing and I admire you for it. I really wish we had met you at the time. But then, we didn’t have independent advice, it was from a tied advisor and that too speaks volumes now we can look back and understand how we came to get to this stage.

As for your spelling – I presume you have been able to retire early, so it hasn’t hindered you? I hope you don’t get too bored, there doesn’t seem too much of a point to being retired if so.

As for burning your house down – well you’ve got me worried now and I can’t think of a solution that you would want to take. Except please think of all those people on MSE who enjoy your posts and are helped by them.

dunstonh

And that’s probably why the risk factor was not addressed because many, ordinary, people like us would have done just that

I found it was 50/50 when risk was discussed correctly.

Risk is a tough one. You hear people saying they wouldnt have taken the risk with an endowment had they known there was a risk yet they have then gone out and bought an investment property on a 80-90% mortgage which has a much higher risk.

Sometimes it is so hard to judge risk with some people as they tell you one thing and then later say something different. I have a questionnaire for risk which I created by pinching bits of various risk profilers and some of the questions in there are actually the same but asked in a different way. You should get the same answers on those more or less but often you dont.

I bet if you asked a newbie buy to let investor a few years ago if they knew the risks and accepted it, that they would say yes and that property always makes money. I bet if you asked them after it fails that they will say they didnt know the risk and they would never have done it had they known they could lose their own property.

mayb_2

Sorry dunstonh but I have to say that is rubbish - hardly anyone in the 'ordinary' man in the street bracket would risk their homes, savings or pensions and if it wasn't such a big issue there would not be so much time and money spent on Ombudsmen and the like. People who have paid all their working lives in to company pensions have been stung in recent years - it is not like they had a choice or a say in that.

Property can be a safer bet because in the end the prices do go up over time - you have to know you wont want the money straight away. Poor advice - and I have witnessed this being given - might lead people into large mortgages on buy to let properties. If you buy at the right price or let a second home, as often happens when two homeowners get together, there is a very high chance you will make money - like everything else it is a question of understanding the market and having a choice on when you cash in on your investment. This doesn't happen with these endowments and pensions. You have no choice on the investment or the time of selling - you are totally in the hands of the company taking your premiums and the time that this finishes could be a good or a bad one. It is a total gamble and not one many of us would take. I don't even bet on the Grand National myself.

treliac

dunstonh wrote: »

Risk is a tough one. You hear people saying they wouldnt have taken the risk with an endowment had they known there was a risk yet they have then gone out and bought an investment property on a 80-90% mortgage which has a much higher risk.

I bet if you asked a newbie buy to let investor a few years ago if they knew the risks and accepted it, that they would say yes and that property always makes money. I bet if you asked them after it fails that they will say they didnt know the risk and they would never have done it had they known they could lose their own property.

I can't see the essential correlation between the 'average' endowment mortgage (I use this as the most common type of I/O) holder and someone who has bought to let - although I know nothing about BTL.

Even if someone happens to have done both, it doesn't automatically follow that they were a sophisticated investor who had full understanding of what they were doing when they took their endowment mortgage. Knowledge is accrued incrementally.

treliac

mandy01 wrote: »

I wondered if any has any advice regarding applying for mis sold endowment if you no longer have a mortgage. I have recently written to the compnay that sold me an endowment that is not performing to the level I was told it would and will not meet its target. I no longer have a mortgage but wondered if this will effect my application. I did include in my letter to the company the little sketches that the advisor sketched showing only that the investment would go up. They have now sent through their quetionaire and there are questions on there like my new earnings which are far more than they were and questions regarding my past mortgages. Although I am not married I co habit with my partner and on the form it asks for 'Partners earnings' I feel that this should not come into the scheme of things and should not be included does anyone agree?

Mandy - From what I understand, you would not be complaining about an investment that has not performed as you were told it would. Any complaint you might have could only be about what you were or were not told at the actual point of sale, e.g. that you were not informed about the risk factor at all (see the main site and back through this thread for more info). If you understood you were taking a gamble, this would not constitute a mis-sale.

As regards filling in the form, they will want to know about past mortgages so that this one can be put into context with other decisions you have made, e.g. were you advised to end a repayment mortgage to take the endowment? I don't know quite what your earnings today have to do with it. I haven't been asked that question in relation to my own complaint, but earnings at the time you took the mortgage would be relevant in so far as what you were able to afford when you took the endowment.

I don't think it necessarily matters that you have paid the mortgage off and depends on other factors.

Again, I don't know what your partner's current earnings have to do with it either - doesn't seem relevant. I would probably ask why they want to know this.