Act now on mis-sold endowments: new article

Debbie_Foy

I wasn't sure if I had been mis sold or not, but I had nothing to lose. Now I am £4332 richer for very little effort (just had to fill in a simple form). Hopefully if anyone out there has not had enough motivation to claim yet, this will spur them on. Procrastination is the thief of time, so go on....... do it now!

Paul_Herring

Unsure if this has already been posted yet (5 pages on my settings and got the link from the weekly email) but:

http://personalfinance.iii.co.uk/articles/articledisplay.jsp?article_id=2795572&section=Mortgages

From one of the comments:

eDelightfully provocative article, reminding us that greed and fear have always existed but our compensation culture makes us forget.

ajd3

Hi, I wonder if any one can help me. I'm not sure if I have grounds for a miss-sold endowment complaint or not. I have all the paperwork including a hand written report by the financial advisor of an independant mortgage advisory centre. I think I may have grounds on the basis of one sentence within the report, where it states that '...Endowment chosen for portability and the potential to redeem the loan early or generate a cash surplus.' At no point is there a suggestion that it might not meet the required amount on maturity. It does state, though, that it is 'required to grow at a rate of 7% over 25 years to meet your mortgage commitment.'
I took the endowment out in 1998 but changed my mortgage to a repayment mortgage about 4 years ago (I changed from endowment because of all the bad stuff in the media about endowments). Last June when I got the endowment statement in from the insurer (Standard Life) it was an 'Amber Alert'. I kept the endowment as a savings plan, was that sensible?
Thanks in advance for any replies

dunstonh

Endowment chosen for portability and the potential to redeem the loan early or generate a cash surplus.'

That is totally correct and not grounds for a mis-sold case.

At no point is there a suggestion that it might not meet the required amount on maturity. It does state, though, that it is 'required to grow at a rate of 7% over 25 years to meet your mortgage commitment.'

So it says it needs to grow by 7% to meet the mortgage commitment. Any less than that would not pay the mortgage.

I took the endowment out in 1998 but changed my mortgage to a repayment mortgage about 4 years ago

So only 1998 to around 2002 would be considered.

I changed from endowment because of all the bad stuff in the media about endowments

1998 and with the right provider and funds and you could have a very good endowment. You could also have a poor one but you cannot assume you have a bad one on the basis of media articles. Too many good ones have been surrendered on the basis of what has been read and not linked to what they actually have.

ajd3

dunstonh,
Thanks for your replies, I didn't think I had a case but I don't really understand all that financial stuff. My mortgage isn't very big and I hope to be able to pay it off well before the 25 year mortgage period. I figured that as the endowment has 17 years to go, and anything can happen with the stock market in that length of time, it would be worth keeping it going. As I don't need to rely on it to pay off my mortgage it doesn't worry me if it slightly under performs.
Thanks again

dunstonh

I figured that as the endowment has 17 years to go, and anything can happen with the stock market in that length of time, it would be worth keeping it going

Thats a risky assumption to take. You could be with a provider that has no stockmarket investment in their fund. In which case, you are highly unlikely to hit target or come close. Or you could be with a decent provider with decent unit linked funds and come in with a surplus. If you post some details about the plan, we can help post some "opinions" on the policy to help you in your decision.

loobs40

loobs40 wrote:

I have just used the Which template letter to write to the Yorkshire BS on behalf of my partner about misselling.

He was sold an low cost endowment with an new mortgage in 1986 on the basis that it would pay off his mortgage and he would get a lump sum. At least those are his recollections of it.

I looked at the policy on Sunday with him and he told me that the advisor said that the mortgage would be fully paid off by and the 'sum assured' of £8250 would be the bonus on top. I explained to him that wasn't the case.

To put my partners understanding of financial matters into some context, he is only one stage up from keeping his money under the mattress. He has no credit cards, he budgets his money every week putting aside small amounts to pay off bills and worse, most, if not all of his utility bills are in credit because he prefers to pay more whn he can rather than risk being in debt.

Since I met him a few years ago, I have persuaded him to open up a on line saver account since he was keeping all his money in a Barclays current account with practically no interest, but even that took some doing ! He is very much in awe of financial advisors and anyone in a suit basically, and when he took another mortgage out a couple of years ago, the advisor managed to sell him practically every extra going . Needless to say I cancelled all the unnecessary ones, and managed to get him cheaper home insurance etc saving him a fortune in the process

My misselling complaint is therefore primarily based on the fact that the advisor took no account of his attitude to risk and obviously did not explain the risks of a low cost endowment clearly enough. As my Partner said to me, if that advisor had explained it properly then there was no way on God's earth he would have taken it

I know that technically he was sold the policy before 1998, but does anyone know if the Yorkshire Building Society are one of those organisations that will investigate a complaint voluntarily ?

Good news. My partner received a letter today upholding his claim and awarding him £2700 compensation. And all because I stumbled on one of his red letters lying in his living room !

I wrote the Which letter, he filled in a straightforward questionaire and we expected to have to wait for months for a decision. IN the end it was less than two months

Trouble is I am too honest. I am not going to claim for my own endowment precisely because at the time of taking it out I understood the risk and the connotations of the stock market falling as well as rising. I just see it as a savings plan now

carlaj

I had avoided claiming on my endowment, because all those TV and radio ads make it all seem so seedy, but after encouragement from your newsletter I put in a claim in December 2005 for my Norwich Union endowment which I took out in 1988 and only has a couple of years to run.
I used the standard FSA form, and after a couple of reminder letters to the sellers (Halifax BS) our claim was upheld. Primarily because they had destroyed all their paperwork and couldn't disprove the claim.
I let them calculate the amount using their standard method (Because over all those years I have switched mortgage several times and I really dont have all the details to do a more complex calculation) and we got £7500. I've used this to repay part of the mortgage, seeing as the endowment policy itself is going to be woefully short. It wont cover the shortfall, but its miles better than nothing.
So I would encourage anyone else who feels let down by the promises made to them when the bought their endowment to have a go. It only costs a postage stamp and about an hours work to fill in a form.
Thanks Martin!

Fullspizz

Myself and my wife took out an endowment policy in April 1999 from an IFA to run alongside our mortgage.
I still have all the paperwork for this and I have recieved 2 amber warning letters from the Prudential (Originally Scottish Amicable) that it isn't going to reach it's target by about £7,000 at current rates.
In my letter from my IFA outlining various things it states:-
I recommended a growth rate of 7%.
In view of my clients balanced attitude to risk I recommended the following investment split:-
With Profits 50%
Equity 50%

The portability of the Endowment policy and the loan was important, and , this, together with the possible tax free lump sum, given favourable investment returns, made the endowment mortgage attractive to my clients. For these reasons the Capital and Interest repayment method was discounted.
The PEP method was discounted as it was viewed to be too volatile an investment medium given my clients' attitude to risk.

Basically, I would like to know if I have grounds to claim, there is no mention in the paperwork that we may have to increase our payments to meet the target figure.
Although we still have the endowment running, it is running as a savings plan due to a different IFA advising us to change the mortgage 3 years ago to a repayment one.

If we have grounds to claim, then fair enough.
If not, then tough luck, we should have been better prepared but we feel that we relied on his advice as we had little knowledge in these matters.
Thanks

dunstonh

I still have all the paperwork for this and I have recieved 2 amber warning letters from the Prudential (Originally Scottish Amicable) that it isn't going to reach it's target by about £7,000 at current rates.

I am not aware of any Prudential endowment projection where they have issued any guaranteed projection rates. Pru use industry standard projection rates which may not be in line with the potential of the funds recommendend.

Basically, I would like to know if I have grounds to claim, there is no mention in the paperwork that we may have to increase our payments to meet the target figure.

There is no need to write that you may have to increase payments. Indeed, given the funds you are in, it is probably on track now or above track to hit target.

However, the discounting of the PEP as a product is very weak and incorrect. The reasons for endowment over repayment are also weak. The lump sum from an endowment is not tax free, it is tax paid. There are advantages to higher rate tax payers but not basic rate taxpayers (generally) and the ISA (as it was April 1999 so PEPs had just been replaced) would have been more tax efficient. However, you couldnt get the Pru With Profits fund in an ISA (or PEP) so if that fund was chosen specifically, it would eliminate the PEP/ISA.

Is there any mention of potentially not hitting target or requiring 7% pa. average to hit target in the report?

If not, then tough luck, we should have been better prepared but we feel that we relied on his advice as we had little knowledge in these matters.

As it happens, a Pru WP fund and Equity fund commenced in 1999 (meaning it really started investing just before the stockmarket crash) should do very nicely. Pru have one of the best with profits funds out there and the Equity fund(s) give it higher potential for growth.

A stockmarket crash in the early years is something every unit linked endowment needs to pay get it on a good track. All those units go down after a crash and whilst the units you buy at the start are lower and in the short term can put it off track, these are the units that will grow the most over time as they were the cheapest.

For example, the Pru (ex Scot Am) Equity fund has grown by 64.93% over the last 3 years. Thats an annual average of 21.64%. Well over the 7% required to hit target.