Act now on mis-sold endowments: new article

ktel1

thanks for the last. I have already received a letter back from them and they have not stated that I am time barred from making a complaint. However, the nature of my complaint relates to an illustration given just after taking out the endowment which states a level of payout given after a certain number of years (which is about now) and achieving an annual growth rate of a certain %. My policy appears to have achieved very close to the annual growth given in the illustration (figures provided by Phoenix) but the value of the plan does not relate to anywhere near what is stated in the illustration and I want to know why.

dunstonh

My policy appears to have achieved very close to the annual growth given in the illustration (figures provided by Phoenix) but the value of the plan does not relate to anywhere near what is stated in the illustration and I want to know why.

I have to be honest and say that I doubt very much that Phoenix have returned anywhere near what the illustration in 1987 showed. Back then, they used rates of return that were consistent with returns of that period and based on boom/bust and high inflation. Not the lower returns we have seen during low inflation. There were also some issues with illustrations of that period not showing the correct growth rates. You may want to look up "lautro endowments" on google.

Chazbosh

I really hope someone can assist me in this hour of need ????

A good friend of mine, who is no good with numbers, approached me recently and asked me to help him out. He purchased an endowment mortgage through Mandrake Associates in 1990 and was told, as per normal during that time, that the policy would pay off his mortgage and he would have some extra money to play with.

Sure enough, a few years ago, he started recieving letters explaining that there was probably going to be a shortfall in the policy and he was advised to make arrangements to sort the problem out. He contacted the Financial Ombudsman Service and to cut a very long story short, was eventually told that his claim was not to be upheld.

The reasons given for this were :-

1. that Mandrakes did not give a binding guarentee that the policy would at least meet the target at maturity as no guarentee exists in the policy itself.

2. that the Ombudsman was not persuaded that the policy recomended by Mandrakes was unsuitable for my friend given his circumstances at the time and

3. that the Ombudsman thinks it more likely that my friend was aware and accepted that there was some risk that the policy might not produce enough to repay the mortgage !!!

I think this last point absurd as I believe anyone taking out a mortgage wants to be sure that it will be paid off at a certain time and does not want to be in a position of having to find thousands of pounds at the end of the term.

My question is can my friend or I do ANYTHING more to fight his corner after the Ombudsman has come to his decision ??

Any thoughts would be gratefully recieved. :mad:

dunstonh

I think this last point absurd as I believe anyone taking out a mortgage wants to be sure that it will be paid off at a certain time

Its not absurd. In 1990 no endowment had ever failed to hit target and endowment mortgages were the cheaper option. Many people went with the cheapest option and didnt really see the it as a risky option. Much in the same way people say property always goes up and they kept borrowing against it.

My question is can my friend or I do ANYTHING more to fight his corner after the Ombudsman has come to his decision ??

If the ruling was from an ombudsman and not an adjudicator then its end of the road. If it was from an adjudicator then he can appeal the decision and ask and ombudsman to review it. However, the reasons given seem quite fair and correct for a case where documentation exists showing correct process was used.

Most endomwent complaints are not upheld. The majority that do result in redress do so because documentation is missing or is not of a high enough standard. If the documentation exists, is filled in correctly and the risk warnings are in place then its nearly always going to result in a complaint being rejected. Having an endowment is not a mis-sale. How it was sold is where the mis-sale could be.

and does not want to be in a position of having to find thousands of pounds at the end of the term

He has known about it for about 7 or 8 years now. Mortgages are cheaper than ever and its probable he has saved £10-£20pm over a repayment mortgage. So, budgeting for it should be a problem unless he buried his head in the sand and ignored it.

mayb_2

I have a feeling your friend will have to pay considerably more than the £20 - £30 per month sugested by dunstonh and just because they are relatively cheap right now does not mean they will not cost more in the future dunstonh, so not necessarily a good position to find yourself in long term. You do also have to arrange insurance too.

We were advised to up our payments by £100 per month and after a year of that our shortfall was even bigger and we had just thrown away a lot more money.

I think you may also find that the point Chazbosh was making on behalf of his friend, is that if he had been in any doubt about the fact that his mortgage would not have been paid off at the end of the term as he was advised it would be, he would not have purchased it. So a missale - he didn't understand there was a risk involved and the fact these had not ever failed up to the time at which he purchased makes it even less likely that the salesman pointed out the risk to him. These figures were never put in writing and so it is not possible to conclude no missale just because they were not put on paper.

Dunstonh is right and you can appeal the decision made by the Ombudsman service and you only need to write and say you want this to be put before the actual Ombudsman. There is a further level of appeal after that but in both these cases it is unlikely that they will look at the decision itself, only whether the correct steps of the process were followed. I do not believe that after all this time you are still saying these policies were cheaper and that is why they were purchased, in many instances they were not offered alongside the comparator of a repayment mortgage. They attracted more commission for the salesman and that accounted for the missale of so many of these types of mortgages - not that old chestnut that in fact we all knew and understood the mortgage and financial markets back in the good old days of the late eighties and early nineties and only bought them because they were cheaper. The fact that now people know the risk they are not being sold anymore says it all.

dunstonh

I have a feeling your friend will have to pay considerably more than the £20 - £30 per month sugested by dunstonh and just because they are relatively cheap right now does not mean they will not cost more in the future dunstonh, so not necessarily a good position to find yourself in long term. You do also have to arrange insurance too.

If he has left it late to cover then yes he will. However, he would typically have saved monthly that amount in the past. Plus £20 was a lot more in 1990 than it is now.

I think you may also find that the point Chazbosh was making on behalf of his friend, is that if he had been in any doubt about the fact that his mortgage would not have been paid off at the end of the term as he was advised it would be, he would not have purchased it. So a missale

Prove it. Thats the problem. If the paperwork is correct then there is no reason to believe there was a mis-sale. Lots of decisions are judgement calls. some are right, some are wrong. However, you dont get to complain and get a payout when the judgement call is wrong .

These figures were never put in writing and so it is not possible to conclude no missale just because they were not put on paper.

A 1990 sale would have had risk warnings on the illustration and documentation. More likely that the risk was down played but that doesnt make it a mis-sale.

I do not believe that after all this time you are still saying these policies were cheaper and that is why they were purchased, in many instances they were not offered alongside the comparator of a repayment mortgage.

Cost comparisons were frequent on the two options and more often than not the endowment route was cheaper. You cant change that fact.

The fact that now people know the risk they are not being sold anymore says it all.

You are wrong. Investment mortgages are still taken out. Endowments ceased to be as tax efficient and ISAs and unit trusts replaced them. They are not taken in the same volume as endowments or even close to what they used to be but many experienced investors go with the investment backed mortgage. Myself included.

mayb_2

Experienced investor, downplayed, cost comparisons were frequent on the two options,

I think that we are talking non experienced investors, downplayed to the point of not being mentioned, and frequent as in not at all.

DREAMER

DREAMER wrote: »

Many thanks for your comments turbobob and dunstonh.
Although the "churning" was something I had not heard of, on this I am clear though , I was advised to simply start again to surrender the exsisting policy and take out the one they offered .As to the BM agent being tied to L&G again this is something I cannot remember but I will complete the questionnaire and await there response.
In connection to my shortfall I am very lucky when I read of others as I may be only a few thousand short,however and yes, perhaps foolishly I looked forward to having a house paid for and a few thousand over,but only because that is what BM s agent had told me.Such is life.

I got a few facts wrong on my last post which has been pointed out to me.It was National&Provincial who were my first mortgage provider,they set up the endowment with Standard Life in 1979.It was to run until 1999.In 1986 we moved to our second house which I thought was set up with Birmingham Midshires.It wasn`t, It was still with N & P who recomended me to take out a new,better? endowmnt with L&G. You may recall I also had a small endowment with AXA .I have received a letter from them,AXA, Without Prejudice stateing that the believe that there endowment policy may have exposed me to a greater level of risk than was suitable and that they will be writing to me before 26 June with an offer of redress.
On the matter of the first/second endowments I have received a further letter from ABBEY,who are dealing with N&P complaints, stateing that there investigation is taking longer than expected and they will write again in four weeks.
Thanks to all who have posted .

mayb_2

All sounds pretty hopeful dreamer - good luck with that.

rebecca1

I recently wrote to Phoenix regarding a mis-sell with my endowment. They have agreed to pay compensation but how do I know whether their calculation is fair and just? Their formulae is quite complicated, if I find it not too be fair do you think that the Ombudsman would make them award a higher amount?

Thanks

Rebecca