Act now on mis-sold endowments: new article

dreamylittledream

dunstonh wrote:

guarantees with provisos are allowed. I guarantee to do something as long as you do xyz is a guarantee.

You will actually find that the word guarantee is hardly ever used now. Even on Guranteed equity bonds, you tend to find the word guarantee is replaced with other words which have less strength to them. Such as security. Capital guarantee doesnt mean the same as Capital Security.

Interestingly there are a number of ex Eagle Star policies currently at FOS that Zurich are attempting to have struck from FOS jurisdiction and a test case heard in the High Court that revolve around the use of the word 'guaranteed' - they are currently timebarred cases awaiting an Ombudsman view on jurisdiction.

Zurich's agrument is this word was used so liberally by Eagle Star that should an Ombudsman decide its meaning was literal this could threaten a large percentage of their business - a la Equitable life.

No wonder 'guaranteed' is rarely used by Life Offices these days - the consequences of its use could be very expensive for them...

mayb_2

A lot of people mix up could with would

No doubt dunstonh but it is difficult to imagine mixing up the word guarantee with anything else.

My endowment policy stated that a lot of the final payment would be made up of a terminal bonus. They forgot to mention that they would not necessarily be paying one of those.

Quote: from me
Most of us would not want to gamble with our homes and our pensions however.


from dunstonh

That is you. That is not most people.

Perhaps I should rephrase that dunstonh - most of us would not knowingly want to gamble with our homes and pensions.

I am of the impression that the people you deal with are not in the same ball park as a lot of the people on this site - the ones who feel they have been missold are not the ones knowingly investing in these things. You did say that you had only ever had one case of misselling levelled against you and that did not succeed. That means that those you deal with are aware of what they are doing and happy to go ahead with it. They may be able to afford to gamble in this way.

Every buy to let mortgage someone takes out is gambling with their home. Every income drawdown is gambling with their pension. Every person going self employed is gambling with their home.

Really don't follow you there dunstonh - why is a buy to let gambling with their home - they are letting it and presumably living elsewhere. This is a straightforward investment. The pension issue is not a gamble it is a decision. Not everyone can afford to have a personal penison - especially one that may not pay them anything at the end. How on earth is self employment gambling with anything other than your sanity. Yes both I and my husband have been self employed and run our own businesses - I have never seen it as a threat to my home and it has never proved to be so.

dunstonh

why is a buy to let gambling with their home

A mortgaged buy to let is high risk. If it goes wrong at the wrong time you could end up having to sell both the let property and your own home and even go bankrupt.

The pension issue is not a gamble it is a decision.

Income drawdown is taking a risk with the aim to get more.

Yes both I and my husband have been self employed and run our own businesses - I have never seen it as a threat to my home and it has never proved to be so.

Get ill and see how the business survives.

beez30

Hi

My unpleasant story starts in Sep. 1993 when i fell for the old 'You'll end up with a tidy lump sum for yourself when the policy matures'.

Realised in January as I was getting over the post-Xmas cash hangover that i hadn't had a projection letter from my endowment holder (Norwich Union) since 2003 (this was a significant risk letter) so i rang them to check if this was because my policy was back on track. I was told that i should receive a letter at least every two years and that my policy was now at the 'High risk' level.

After a bit more chit-chat about how my policy was sold to me the very polite phone advisor asked me if I would like to register a complaint which i indeed did. He promised to send me the paperwork i had been missing.

I received my new 'High risk' projection letter which shows i am now somewhere between £10,000 & £15,000 short of my target of £39,000.

After filling out the complaint form and returning to Norwich Union, I received the reply to my complaint within 2 weeks, the company had upheld my complaint and i was going to receive an offer. They obviously thought long and hard about the offer because it arrived in a different envelope on the same day - £627 WOW!! I'M RICH!! (NOT)..

I understand how the redress works (to make me up to the same level as i would be if i had been on repayment) but surely there should be somewhere set up where the average Joe can go and check the amount being offered. I know there is one site that charges £50 but that's quite a big chunk of my massive payout!

Does anyody know of anywhere where i can go armed with a calculator and get a rough idea if i am being ripped off again?

Also does anyone know if a successful compo claim affects your chance of getting the Norwich Union Promise payout?

PS. Whilst going through some old paperwork I found my original endowment quote showing that if my policy grew at 7% i would have an excess of approx £8K and if it grew at 10.5% i would have an incredible £32K in my back pocket!!!! No wonder the endowment turned my head. Unbelievable what they were allowed to get away with!!

mayb_2

I don't see that a mortgaged buy to let is high risk dunstonh unless you owe 100% of the property value and then that depends on how much you paid for it and what conditiion it was in etc. These are things that people can see, deal with and take action on if they chose. Unlike stocks and shares that can crash overnight and leave you stranded, if we get involved in a war with Iran for instance, and many many other variables can hit the stock market and we know now that nothing is guaranteed even when it says it is guaranteed!

Many of the finance companies invest in property and land as more secure ways of investing funds - so what is good for the goose should be good for the gander don't you think.

It is not necessary to tie up property that you live in with a business so the crash of one would not mean the loss of the other. Anyone can go bankrupt at any time including when they have invested on the stock market. The connection is no more viable if you are self employed or an employed person losing your job - working from home or working in the office. These are all risks we are exposed to if we become ill - we paid our national insurance stamp the same as everyone else.

It is all about deciding on risk for yourself dunstonh and having some control over your own finances. So we don't get told about it 10 years down the line - sorry we wont be able to pay off your mortgage with this endowment - Oh did we say your pension would be this big - only something went wrong there and now your getting virtually nothing. I know why not work until you are 110 and then it will be fine.

mayb_2

https://www.exasoft.biz/mfwebuser/default.asp

Beez30
The above link will take you to the calculator for use of members of the public - it is the same one as used by the FSA and Which. Click above or aste it into your browser and it takes you to this secure site.

dunstonh

I don't see that a mortgaged buy to let is high risk dunstonh unless you owe 100% of the property value and then that depends on how much you paid for it and what conditiion it was in etc. These are things that people can see, deal with and take action on if they chose. Unlike stocks and shares that can crash overnight and leave you stranded, if we get involved in a war with Iran for instance, and many many other variables can hit the stock market and we know now that nothing is guaranteed even when it says it is guaranteed!

Interest rates increase and property values drop you into negative equity on the BTL. The rent isnt covering the mortgage. Plus your own mortgage has done something similar. To clear the debt and not be made bankrupt you have to sell both properties.

There are a whole load of scenarios where you can lose everything from a mortgaged BTL going wrong.

You comparison with the stockmarket is not correct. Property is just another asset class that can fluctuate in value.

mayb_2

Why does the rent stop covering the mortgage if the mortgage is still the same amount dunstonh - lots of people have fixed rate interest these days to avoid that situation and repayment times can be stretched. people swap mortgages all the time to get a better deal. Negative equity only kicks in if you need to sell your house. A rise in interest rates means that less people will be able to afford a new mortgage and more people will want to let. Rents can go up as well as mortgages.
It is a lot more secure than the stockmarket as a long term investment.

I would not recommend anyone getting a 100% mortgage on a new house and having to rely on maximum rent to cover it as there is more to maintaining a house than paying the mortgage. The biggest risk is having the house unlet for any period in time. It is possible to allow your home to be let for social housing and your income is guaranteed if not as high. However, if you can afford it and have to put in £100 - £200 per month to cover the costs in the long run you will pay off your mortgage and have a lump sum in the building to give you a retirement pension. I believe that is safer than giving the same amount to some penison company and they don't come up with the goods at the end of the term. At least you had some choices on the way.

In the long run I do not believe house prices will not continue to rise although probably a lot more slowly now than in the past. There is a shortage of housing in this country and while that remains the case it is a good investment. Ultimately we all have to live somewhere.

mayb_2

Why does the rent stop covering the mortgage if the mortgage is still the same amount dunstonh - lots of people have fixed rate interest these days to avoid that situation and repayment times can be stretched. people swap mortgages all the time to get a better deal. Negative equity only kicks in if you need to sell your house. A rise in interest rates means that less people will be able to afford a new mortgage and more people will want to let. Rents can go up as well as mortgages.
It is a lot more secure than the stockmarket as a long term investment.

I would not recommend anyone getting a 100% mortgage on a new house and having to rely on maximum rent to cover it as there is more to maintaining a house than paying the mortgage. The biggest risk is having the house unlet for any period in time. It is possible to allow your home to be let for social housing and your income is guaranteed if not as high. However, if you can afford it and have to put in £100 - £200 per month to cover the costs in the long run you will pay off your mortgage and have a lump sum in the building to give you a retirement pension. I believe that is safer than giving the same amount to some penison company and they don't come up with the goods at the end of the term. At least you had some choices on the way.

In the long run I do not believe house prices will not continue to rise although probably a lot more slowly now than in the past. There is a shortage of housing in this country and while that remains the case it is a good investment. Ultimately we all have to live somewhere.

dunstonh

Why does the rent stop covering the mortgage if the mortgage is still the same amount dunstonh -

Interest rates fluctuate and mortgage payments can go up and down. At this moment in time, with recent increases, some people are now in the position where the rent isn't covering the mortgage payment. There are possibly more increases to come.

A war in Iran would push global inflation up and interest rates further and that could cripple some households.

lots of people have fixed rate interest these days to avoid that situation and repayment times can be stretched.

Many don't have fixed rates but if they do, what happens when the fixed rate runs out. Also, repayment times can be stretched if they can afford it but adjusting the term doesn't reduce the payment. BTL mortgages are interest only.

Negative equity only kicks in if you need to sell your house.

Or forced to sell the house if you cant afford it.

It is a lot more secure than the stockmarket as a long term investment.

No its not. A leveraged investment is not as secure as a non-leveraged one.

However, if you can afford it and have to put in £100 - £200 per month to cover the costs in the long run you will pay off your mortgage and have a lump sum in the building to give you a retirement pension.

Where do they get that £100-£200pm from. Most are making no money on the rents unless they have been doing it for many years.

When it comes to sell (to repay the lender what you owe them) the Govt will hit you for 40% on the capital gain. If you keep the property because you have a lump sum to repay the lender, then the rental income is taxable at your highest rate. Rental yields are around 4-5% of the value of the property. That isnt exactly a desirable return.

I believe that is safer than giving the same amount to some penison company and they don't come up with the goods at the end of the term.

A bad pension is just like a bad property. A good pension is just like a good property. Do you honestly think that property is better than a teachers pension?