Act now on mis-sold endowments: new article

defender_of_the_weak

Dunston

For the majority of cases your comments above would be correct but you have to realise that not all companies follow the rules. Even some of the biggest providers load calculations or circumstances to minimise the amounts payable (if anything).

In the case of brokers we often receive an 'offer' that bears no relation to the true amount of redress. One local broker deducted the windfall payment quite blatantly in a case involving FOS and because the client had already been fighting for 3 years she accepted the lower figure rather than wait another 2 years for a full ruling.

dunstonh

DOTW, I know that occassions do exist which are unfair. However, its the presentation from mayb that unfairness is the norm.

There is unfairness all round. I have never had a complaint on pensions or endowments mis-selling but I have to pay around £2500 a year to cover those that did on top of the £3000 a year PI cover I pay to cover myself.

I am all for fairness but it does work both ways as well.

mayb_2

With all of this fairness flying around it is a wonder we need this site at all. My mortgage was shortfalling by about 50% dunstonh - my settlement didnt put me back in the position I would have been in and I had to finish the endowment to get the money so I don't follow your drift about the cash in value of the endowment.

The fact is most people know that they are worse off now than they would have been - not just feel it. They have to increase their mortgage repayments to pay off on time - providing they found out before the end of term which wasn't the case in the beginning. We had to pay more than the cost of the mortgage and the endowment and take out a separate mortgage insurance to cover it. The total of my interest payments and the endowment which included the insurance was not a saving on a repayment mortgage plus insurance - I would have paid about about the same.

It was just a fixed rate of interest for two years that made us buy it. So, sorry - but I don't know where I was saving money in the past - it just wasn't happening. If interest payments are less now than they were that is true for all mortgages not just endowment ,term as you know.

Perhaps those of you who think this is the case for you too you could let us know - or am I the only one who feels they came off badly in this carve up?
We thought up until quite a long time into this policy that as long as we kept up the payments of interest and endowment we would pay off our mortgage at the end of the term. No amount of telling it this way and telling it that way prepared us for the discovery that that just wasn't going to happen. As you pay off the capital of your mortgage you actually diminish the amount of interest you owe so more of your repayment comes off of the capital as you go along. If you decide to sell at any point you have that capital to use. If you sell up during an endowment mortgage you still owe the whole sum. If you cash in an endowment early you lose out. You are paying fees out of your endowment premiums too - which diminish the returns in the early years and so on and so on. I give up.

dunstonh

my settlement didnt put me back in the position I would have been in and I had to finish the endowment to get the money so I don't follow your drift about the cash in value of the endowment.

The redress plus surrender value if paid into the mortgage will put you in the position you would have been had you had a repayment mortgage. If you choose to continue the endowment after that point and it gets worse, then that is an informed choice that you chose to make.

The fact is most people know that they are worse off now than they would have been - not just feel it. They have to increase their mortgage repayments to pay off on time - providing they found out before the end of term which wasn't the case in the beginning.

The fact is that every property owner is better off than they would have been had the economic situation continued that allowed endomwents to pay a surplus. People are paying hundreds of pounds a month less on their mortgage payments and seen their real property values increase.

mayb_2

I didn't keep the endowment and so I did have to pay an insurance on the new mortgage. My settlement included the surrender of my endowment.


You said:

If you choose to continue the endowment after that point and it gets worse, then that is an informed choice that you chose to make.

Wheras I said

my settlement didnt put me back in the position I would have been in and I had to finish the endowment to get the money so I don't follow your drift about the cash in value of the endowment.

The fact is that every property owner is better off than they would have been had the economic situation continued that allowed endowments to pay a surplus. People are paying hundreds of pounds a month less on their mortgage payments and seen their real property values increase.

What on earth does that mean? The endowments paid a surplus only because the money paid into them by customers was invested to produce that surplus. Those investing the money (finance companies) also made money. This did not affect anyone else or cost anyone else. People's new mortgages are bigger in real terms than they were before. They may pay less interest but they have had to borrow more capital. Earnings are not shooting up at the same percentage rate as house prices and an increase in the interest rate is going to leave some people in a very poor financial position when they may have borrowed as much as 5 times their earnings. And no this is not out of some sort of greed but because it is the only way they are going to be able to buy a house.

There was a report recently on the increase in the number of people losing their houses because they can't afford the mortgages. You cannot look at a snapshot in time and then apply those rules to everyone of every age. My son bought his house at a different time than I did - his situation regarding choice of mortgages and interst rates was very different to ours. I spent many years paying mortgages at 8 - 15% - he has never had to pay anything like these percentages. His outgoings each month are far higher in real terms than ours were.

The bottom line is that people who did not understand what they were doing bought these mortgages. They, like me, would not have touched them with a barge pole if they had known of the risks involved. They would have made different choices and had different outcomes. That is why they are worse off and that is why they are or should be compensated. Having never missold a mortgage dunstonh you may not be best placed to comprehend this fact and its effect in real terms.

dunstonh

mayb, you went on about not including the surrender value but you have to include the surrender value as part of the redress payment.

What on earth does that mean? The endowments paid a surplus only because the money paid into them by customers was invested to produce that surplus.

Endowments worked best in a high inflation, boom/bust economic cycle. The move to a low inflation, steady economy hit endowment performance very hard but that move has also reduced mortgage payments significantly and encouraged the massive rise in property values. Had the old economic cycle remained, endowments would all be paying surpluses again but we would all be worse off with higher monthly payments on the mortgage.

People's new mortgages are bigger in real terms than they were before. They may pay less interest but they have had to borrow more capital. Earnings are not shooting up at the same percentage rate as house prices and an increase in the interest rate is going to leave some people in a very poor financial position when they may have borrowed as much as 5 times their earnings. And no this is not out of some sort of greed but because it is the only way they are going to be able to buy a house.

People are much better off today than they were 20 years ago. The ratio of borrowing to income has only recently passed the level it was back in 1991 so I'm afraid your information is incorrect.

And no this is not out of some sort of greed but because it is the only way they are going to be able to buy a house.

A great chunk of the increase is due to price speculation. So, yes consumer greed does account for a fair bit of it.

There was a report recently on the increase in the number of people losing their houses because they can't afford the mortgages.

Yes. It went from one person a month to two. Ok it wasnt as low as that but it was just 0.15% of all home loans. Hardly a significant number.

I spent many years paying mortgages at 8 - 15% - he has never had to pay anything like these percentages. His outgoings each month are far higher in real terms than ours were.

That is not typical of the average household.

The bottom line is that people who did not understand what they were doing bought these mortgages. They, like me, would not have touched them with a barge pole if they had known of the risks involved.

The bottom line is that people are still taking biggers risks today than they did with endowments and will always continue to do so when they think they can make more money.

That is why they are worse off and that is why they are or should be compensated.

Mis-sales should be given redress but that doesnt make them worse off as you suggest it does.

Having never missold a mortgage dunstonh you may not be best placed to comprehend this fact and its effect in real terms.

And what are your qualifications in economics and financial services which give you that superior knowledge?


I am not supporting the endowment as a good product or that there were not mis-sales. However, I am not accepting your comments that people selling them were commiting fraud and the that the average consumer was so stupid that they didnt know that it was linked to investments.

ericabro

Hi, Can anyone advise me on this please. My husband and his previous wife took out a endownment with sun alliance/halifax in 1983 for £15900 + £6.500 bonus, The guy who sold the policy has since died and my husbands ex wife has signed this policy over to him. I have started to nag him about sorting this out and so just before xmas he contacted halifax about this and after filling in a form he has just recived a cheque for £75 and been told that there will be a shortfall of around £2000 when it matures next year and that if he had taken out a repayment morgage this £75 would be the diference between the two. So is this right or not as they have also said that if we cash this cheque that that would be the end of this matter, this is there first offer should could would you ask for more?

mayb_2

My qualification may be of equal or greater value than yours dunstonh - we will never know. Each person must be taken on face value we have no way of knowing whether you or I have any at all.

I do however, believe my opinions and those of others on this site do have value and personal experience is also relevant when giving opinions on such matters as finances and mortgages. These are what I chose to give - opinions rather than judgements. I do not know how old you are or what you may or may not know of life. You may have very limited experience of the world outside of your own. You perhaps have the privaledge of knowledge of your field not available to those to whom these policies were sold - it would be difficult to understand theirs (and my) lack of understanding at the time and possibly since.

I gather from your posts in the past that you have not any reason to regret your own financial situation. Have a little pity for those of us that do - often after having taken advice from those who should and could have advised us better. These people did profit from the sale of these policies - we did not.

In recent times I have had to take the opinion of an Ombudsman who sounded about 12 on the phone. I doubt if he was born when I took out my first mortgage. However, he has been put into a position of power and chose to exercise it in his own way. Such is life.

dunstonh

So is this right or not as they have also said that if we cash this cheque that that would be the end of this matter, this is there first offer should could would you ask for more?

£75 is the amount that you are financially worse off.

A 1983 policy would have LAPR tax relief which would have made the monthly payments significantly lower than a repayment mortgage. That has been taken into account. Plus the endowment surrender value.

So, if you take that surrender value, the £75 and the amount saved each month for 25 years, then it equals out to where you would be on a repayment mortgage.

Just because an endowment projection says there may be a shortfall, doesnt mean there will be one. Quite a lot of projections do not include any terminal bonus that may exist on the policy. Equally, with really poor quality endowments, the projection may be overstating the likely amount.

Many endowments get projection shortfalls and go on to pay a surplus. Some have issued shortfall projections just 3 months before maturity and paid a surplus. The system with projections is quite flawed.

You should have been given a breakdown of how the figures have been calculated. If you think those figures have been input wrong, then you can ask for a recalculation or go to the FOS telling them you think you should have more. The FOS will either reject it saying its right or tell them to use the correct calculation. A recalculation could benefit the provider. There are cases were recalculations have resulted in a lower payment as the stockmarket has improved over that time.

mayb_2

People are much better off today than they were 20 years ago. The ratio of borrowing to income has only recently passed the level it was back in 1991 so I'm afraid your information is incorrect.

It would be difficult for me to argue with this as I have no idea what you are including as borrowing. It was never possible to borrow 5 times your income in past years and I understood that the level of personal debt in this country was surpassing all records. Perhaps the words 'some people' should be put in here. It cannot include all of those people for instance whose pensions failed them too.

Consumer greed is often referred to in your posts whether it be house prices or buy to lets, but rarely the commission greedy salesman at the bottom of many a missold endowment policy. As you keep reminding me dunstonh there are two sides to every story.