Act now on mis-sold endowments: new article

dunstonh

Yep! It was called a low cost endowment policy with target growth rates of 7-10.5% in 1991.
Although by the time we sold it in 2008 they had dropped to 3 -5%.

Target growth rate isnt the rate of return. Its the percentage rate used to calculate the premium so it hits target if that target rate is achieved. So, a 6% target growth rate needs the endomwent to return 6% p.a. average to hit target. A 12% target growth rate needs 12% to hit target. These are set at the outset and are not changed. They cant be as tax rules prevent changes (bar some exclusions).

a 4% target growth rate should have no problem hitting target over the term, although in some periods it will show amber or even red. A 12% in my opinion should be classed as mis-sale. Apart from Lautro cases where regulatory rules at the time hid the information from advisers.

4% for example is a good judgement call and whilst it could miss target it is unlikely. 6% even for a unit linked is still quite within its potential. 8% is still possible with unit linked but you are making it a higher risk proposition, albeit cheaper.

mayb_2

When purchasing an endowment policy you have no control over the investment pot and no way of comparing one company's pot with another. You are totally in the hands of an advisor/salesman even if you know what it is you might need to know about the investment or that it is an investment at all.

I was advised later by an IFA that there were few worse performing endowment pots than the one 'supporting' my mortgage. I was wasting my money and every penny given to them was another penny wasted. Not something the company itself told me, as I have already said we paid more into it on the promise of fixing the problem.

In the case of my pension savings endowment the company had closed the fund and declared that they would not be paying any final bonuses yet I was not told about it. This is in contravention of FSA rules and the FSA helped to cover up this fact and buried it along with the website that it had been posted on. A closed fund is not going to hit any targets as it cannot grow in the normal way with new investment funding payouts on old ones etc.

I am sorry I do not and never will believe that this kind of behaviour by 'regulated companies' wasn't common place. I cannot just be that unlucky with two different products from two different and very large companies!!

I wonder if anybody else in the selling zone is going to reply to your post Crazy Saver?

Crazy_Saver

dunstonh wrote: »

Target growth rate isnt the rate of return. Its the percentage rate used to calculate the premium so it hits target if that target rate is achieved. So, a 6% target growth rate needs the endomwent to return 6% p.a. average to hit target. A 12% target growth rate needs 12% to hit target. These are set at the outset and are not changed. They cant be as tax rules prevent changes (bar some exclusions).

a 4% target growth rate should have no problem hitting target over the term, although in some periods it will show amber or even red. A 12% in my opinion should be classed as mis-sale. Apart from Lautro cases where regulatory rules at the time hid the information from advisers.

4% for example is a good judgement call and whilst it could miss target it is unlikely. 6% even for a unit linked is still quite within its potential. 8% is still possible with unit linked but you are making it a higher risk proposition, albeit cheaper.

You've lost me again dunstonh!

I assumed that the % figures shown on my endowment schedule and annual statements were what you've been talking about!

If what you have said is correct, why would the target figures for my endowment have changed?

Surely this goes towards proving that no matter how much us "laymen" try, we are not financial experts and have to trust in our advisors.


I rest my case!

dunstonh

When purchasing an endowment policy you have no control over the investment pot and no way of comparing one company's pot with another.

Yes you do. The only time you dont is if you go direct or use a tied agent.

In the case of my pension savings endowment the company had closed the fund and declared that they would not be paying any final bonuses yet I was not told about it. This is in contravention of FSA rules and the FSA helped to cover up this fact and buried it along with the website that it had been posted on. A closed fund is not going to hit any targets as it cannot grow in the normal way with new investment funding payouts on old ones etc.

The FSA was partly to blame for so many with profits funds closing for new business and an increased focus on financial solvency. That itsnt a bad thing although they managed to fail to do the same with the banks.

You've lost me again dunstonh!

I assumed that the % figures shown on my endowment schedule and annual statements were what you've been talking about!

If what you have said is correct, why would the target figures for my endowment have changed?

The 4, 6 & 8% illustrations show the potential returns. providers can alter those to be less but not more.

Very crude example of target growth rate (and these figures are not correct but to give example) would be say a target of £50,000 over 25 years. Now to hit that target the adviser (or provider in case of many tied salesforces) could set the target growth rate and you would pay the monthly premium on that basis.

If you wanted a low risk target of say 4% p.a. you would pay £100pm. If you felt 6% was more likely it would increase the risk but you would pay £80pm. If you felt 8% p.a. was likely then you increase the risk further but you pay £60pm.

The higher the guessed target growth rate, the lower the monthly cost but the lower the investment amount at the end (as less is being invested).. So, a good low target growth rate would be more expensive but would be more likely to hit target.

Problem was that this setting of target growth rate wasnt common knowledge and we live in a world where people buy products based on the cost.

So, you take two endowments set up for £50k over 25 years. One costs £60pm the other costs £85pm. Which one do you buy?

If you know what you are doing and what to look out for you will pick right. However, what if you dont know? The difference in premium could be a expensive provider. It could be one has critical illness and life cover whilst the other has just life cover. It could be that one has a target growth rate of 8% and the other 4%.

One of the bad things that used to happen would be if you used multiple advisers to shop around. The adviser that was in last always had the advantage as they could lower the monthly premiums by increasing the target growth rate and sell it on the basis it was cheaper.

mayb_2

Dunstonh that was a very clear example of their being none so blind as those that will not see. You obviously do have a very clear idea of what constitutes a good investment at what price and what is a bad one no matter the price.

The point both Crazy Saver, I and others have made repeatedly is that we didn't know about these things - we weren't shopping around for investments and didn't know about the connections between price and probable return. We could not chose pots or control what happened to them as we didn't know they existed or how they worked.

The illustrations you mention were not shown to us either at sale or during the course of our endowment - these were brought in at a later date to the time we purchased or we may have been alerted at some point as to what exactly we had purchased. We all agree we would not have bought an endowment if we had known their was any risk and many have lost the cash payout promised at the end of their term as well.

The FSA cannot be blamed for the fact that the company I was dealing with broke their rules - they can be blamed for taking no action against the company that broke them and in fact helping them to bury this information so nobody else could pick up on it.

I am sure your intentions are good dunstonh but believe your mistaken beliefs in the knowledge of those purchasing these endowments, means you always assume that things were then as they are today, when detering posters from making a claim.

The FSA itself investigated the number of missold endowments and found that the problem was more widespread than they had imagined. This was before this site came into being. This site and the forum for claiming a missold endowment, is here to support those claims not quash them the minute anyone puts their head over the parapet to ask a question.

That is not to say that the detailed knowledge you have of performance and likely outcomes of a fund is not invaluable - it obviously is and your input much appreciated by those asking the question. Which also begs the question as to why they would be asking if they already knew about these things and were just fraudulent claimers.

Like Crazy Saver I still do not understand the ins and outs of these things and appreciate your explanations for the figures etc. However, like Crazy Saver and others I would never touch an investment vehicle, whatever it was for with a barge pole and that includes money purchase pension plans etc. If I can't understand it I don't want it - if there is any question as to what I will receive at the end of term, I would not take a risk of not receiving enough to warrant the expense or less than I had paid for it.

At the end of the day the finance industry will pay for the lack of confidence that I and many, many others feel. The fact that not one of the big bankers answering to the government the other day regarding recent calamities, could claim a qualification in banking says it all for me. Jobs for the boys should not be what qualifies you to top a company of any sort. The banks wont lend as they don't trust themselves not to get it wrong - so why should we trust them either.

dunstonh

The point both Crazy Saver, I and others have made repeatedly is that we didn't know about these things - we weren't shopping around for investments and didn't know about the connections between price and probable return. We could not chose pots or control what happened to them as we didn't know they existed or how they worked.

Which is where the tied salesforce models let you down.

I am sure your intentions are good dunstonh but believe your mistaken beliefs in the knowledge of those purchasing these endowments, means you always assume that things were then as they are today, when detering posters from making a claim.

That is not the case. I have told many people to make claims. I will also tell people werent mis-sold that they dont have a claim. As an IFA, I have had to put in complaints on behalf of clients over the years as IFAs and have a very high success rate.

The FSA itself investigated the number of missold endowments and found that the problem was more widespread than they had imagined. This was before this site came into being. This site and the forum for claiming a missold endowment, is here to support those claims not quash them the minute anyone puts their head over the parapet to ask a question.

The failure rate was too high. There is no argument there. However, it was still less than half the cases. And you cannot discount the fact that the majority of cases that are paid redress are not upheld as mis-sales but paid redress due to insufficient supporting documentation.

Which also begs the question as to why they would be asking if they already knew about these things and were just fraudulent claimers.

It is well known that people forget about 70% of what is told to them. I had it recently. I had it recently where someone had a bit of a whinge of his loss on his investments. He said I had told him a few things. I had and I had to remind him what was said and at the end of it he did say "oh I remember that now". I had also gave him a risk profile questionnaire which he had filled in and put on there what his tolerance to loss was and I wrote him a report which he had acknowledged and confirmed he had read. He had forgotten after 18 months. What about 10-20 years?

At the end of the day the finance industry will pay for the lack of confidence that I and many, many others feel. The fact that not one of the big bankers answering to the government the other day regarding recent calamities, could claim a qualification in banking says it all for me. Jobs for the boys should not be what qualifies you to top a company of any sort. The banks wont lend as they don't trust themselves not to get it wrong - so why should we trust them either.

Problem with all that is you are being negative against the majority for the actions of a minority and in the case of banks, an unrelated industry. Its a bit like saying you dont eat meat because you dont like pork. What about the other meats? I can tell you that your mistrust is not shared by the majority. Business is up for me and all the other IFAs I know. I dont know about bank sales reps though. Although the general feeling is that people dont blame those at the branches. They blame the head offices.

Crazy_Saver

dunstonh wrote: »

The 4, 6 & 8% illustrations show the potential returns. providers can alter those to be less but not more.

Very crude example of target growth rate (and these figures are not correct but to give example) would be say a target of £50,000 over 25 years. Now to hit that target the adviser (or provider in case of many tied salesforces) could set the target growth rate and you would pay the monthly premium on that basis.

If you wanted a low risk target of say 4% p.a. you would pay £100pm. If you felt 6% was more likely it would increase the risk but you would pay £80pm. If you felt 8% p.a. was likely then you increase the risk further but you pay £60pm.

The higher the guessed target growth rate, the lower the monthly cost but the lower the investment amount at the end (as less is being invested).. So, a good low target growth rate would be more expensive but would be more likely to hit target.

Problem was that this setting of target growth rate wasnt common knowledge and we live in a world where people buy products based on the cost.


If you know what you are doing and what to look out for you will pick right. However, what if you dont know? The difference in premium could be a expensive provider. It could be one has critical illness and life cover whilst the other has just life cover. It could be that one has a target growth rate of 8% and the other 4%.

It all makes perfect sense to me know dunstonh.

I have time, experience and people like you to explain things to me in terms I fully understand.

Back in 1991, We were just shown 2 illustrations and told the prices pcm. We weren't aware that different endowments used different growth rates. And as I've mentioned before, we weren't aware that keeping our existing, well performing policies were another option. We just chose the cheaper of the two. Of course if I were presented with an illustration today, I would ask so many questions!

So, you take two endowments set up for £50k over 25 years. One costs £60pm the other costs £85pm. Which one do you buy?

I can honestly say that we probably would have chosen the £85pcm.
Ever since we've had a mortgage, we have always had a separate bank account to deal with the payments and have always increased the D/D payments if interest rates rise but never reduced our D/D when they have fallen. We would always rather pay extra into the account to cover any emergencies and every now and then we have a nice little lump sum to treat the family with!

That's the way we have always worked with money.

Crazy_Saver

The point both Crazy Saver, I and others have made repeatedly is that we didn't know about these things - we weren't shopping around for investments and didn't know about the connections between price and probable return. We could not chose pots or control what happened to them as we didn't know they existed or how they worked.

We all agree we would not have bought an endowment if we had known their was any risk and many have lost the cash payout promised at the end of their term as well.

Well said mayb;)

I am sure your intentions are good dunstonh but believe your mistaken beliefs in the knowledge of those purchasing these endowments, means you always assume that things were then as they are today, when detering posters from making a claim.

This site and the forum for claiming a missold endowment, is here to support those claims not quash them the minute anyone puts their head over the parapet to ask a question.

Give him a break mayb:D

I know dunstonh is a great sparring partner for you but I have to say that since his first reply to my very first endowment question back in October 2006, he has always supported my claim and has even wished me luck!

That is not to say that the detailed knowledge you have of performance and likely outcomes of a fund is not invaluable - it obviously is and your input much appreciated by those asking the question. Which also begs the question as to why they would be asking if they already knew about these things and were just fraudulent claimers.

You were nearly nice to him in this qoute:rotfl:

Cheers mayb:beer:

mayb_2

May be Crazy Saver but a miss is as good as a mile!!

I have no intention of being 'nasty' to dunstonh and I am sure he is aware of that. I see no reason to agree with everything he says however, as I don't and will continue to say so. That does not mean I have no respect for him or his skill within his field and I am more than certain he is not guilty of the crimes of which I accuse others. He is entitled to his opinions and to defend them as robustly as I do mine.

but I am not on this site all of the time - whenever I dip into it there is a record of dunstonh posts sending people away with a flea in their ear. I object to the assumptions this attitude is based on but will not repeat them here as it will be more than a little boring for others.

We must add another string to dunstonh's bow in that having dealt with a few people himself he knows that we forget 70% of what is said to us. How can anyone come up with a figure like that - the older generation are inclined to be forgetful but there is long term and short term memory. Long term tends to hang around while short term takes a break it is the way of things as you age. It is unlikely that the young people are the ones making claims but that doesn't make us all doddery and forgetful. I assume this figure does not apply to the people selling these policies? My sales agent remembered selling me the policy and that he did all required of him. Nothing in writing even from him as this was a second hand report of a phone call made in a vague three line email and unsigned or attributed. However, this was accepted by the ombudsman as proof. Pity I didn't have your figures to quote at the time dunstonh as the salesman was a lot older than me and 12 years had passed.

I am not suprised FSAs such as yourself are busy dunstonh - there must be plenty of business out there, when people's savings are earning so little they must shop around for a better place to put them. There are more savers than debtors acording to the government, so you may be busy for quite a while. Make hay while the sun shines. It is the next generation you need to worry about - most of them have nothing to save or invest as they are the debtors.

Crazy_Saver

How come it's just us two and dunstonh left to fight it out all alone these days.

Where's DOTW, Ed, Vinno etc.,:cool: