Act now on mis-sold endowments: new article

mayb_2

Crazy Saver I will keep everything crossed for your complaint to the Ombudsman. Do keep us posted - think it might be a while before you get an answer though and I supose you will have to carry through on your other plans in the meantime. Best of luck.

defender_of_the_weak

Crazy saver, did your financial adviser explain that is you sell the policy and subsequently win your case with FOS then the sale value is the one that will be taken into account when calculating any redress. It is a difficult one to call because you want to move on but you need to be aware of the facts before you act.

Crazy_Saver

Originally posted by defender of the weak
Crazy saver, did your financial adviser explain that is you sell the policy and subsequently win your case with FOS then the sale value is the one that will be taken into account when calculating any redress. It is a difficult one to call because you want to move on but you need to be aware of the facts before you act.

Thanks DOTW

I wasn't aware of that fact.

I might hang on for as long as is reasonably possible before commiting to anything. My FA is really busy at the moment and has told me that it may be a week or so before she has the time to study my case fully. You never know, the FOS may have got back to me by then:rolleyes::rotfl:

Crazy Saver

mayb_2

Glad to see you haven't lost your sense of humour Crazy Saver.

Crazy_Saver

Hi mayb

I know I was only joking regarding FOS, but when I got in from work today, they had replied:eek:

Not good news. I posted a new thread looking for help but haven't had any replies so I will go and find it, cut and paste, and write it on this thread.

See you in a mo!

Crazy Saver

Crazy_Saver

Hi there.

The FOS have rejected me again!
One of the reasons they are stating is regarding churning.

We were advised to cash in two endowment policies which were estimated to give a £48k surplus. We surrendered them 4 years into the term. The payout, was less than the amount we had paid in premiums. I thought that most policies pay out relatively small amounts until 5 years in to the term. I am sure that this is listed at the bottom of most endowment quotes.

The FOS are saying that we probably asked our advisor to surrender the policies due to the fact that they probably were not performing well. There is no evidence to suggest this. The FOS say that because of the reduced payout they believe that the policies were not on target!

They were not with profits policies, but there is no evidence at all to suggest that they were not on target!

There are many other points that they cannot prove, so they are siding with the firm.

This is so frustrating, as it appears that due to lack of evidence on so many points(either way), we have no hope of ever winning.

The adjudicator has given us the option of having the case referred to an ombudsman. Does anyone know if this would be worth our while, or would an ombudsman just re-iterate everything that the adjudicator has said?

This really is becoming a nightmare:o

Crazy Saver

mayb_2

Crazy Saver welcome to the unique world of the Ombudsman. We claimed churning as well as a miss sale (didn't know the word at the time) becuase we were persuaded to take out a savings plan when I cancelled my pension policy. It turned out that we actually repurchased the same product in a different wrapper. The Ombudsman could not see a connection between these two events despite the fact that the pension was cancelled on the same day as the savings plan was started and the firm confirmed this themselves????

Even when there was no doubt and we could prove our case the evidence was ignored in favour of the firm. Any doubt at all and they sided with the firm. If we had had a video of the sale showing exactly what had happened and what was said they would have found in favour of the firm.

We asked the Ombudsman to look at this again and he did exactly as you feared and reiterated everything said by the adjudicator and even contradicted himself within his own findings - but the end result was the same. He was disingenuous and partisan to a laughable degree. We complained about the Ombudsman and were told we could not complain about the outcome only about the service we had received and whether all proceedures had been followed. Of course all proceedures had been followed. The only next step was a court of law and they even warned us against that as they said it unlikely that a court would find in our favour once the Ombudsman had rejected the claim??? Although when you complain to a company you have to get a copy of their complaints proceedure etc. When you complain about the Ombudsman it is really difficult to find out how to go about it - they really don't want to tell you. In retrospect it may have been better to take it to our MP.

I would not say don't go there as the more people complain and query the process the better. Just don't expect too much and you wont be disappointed. You never know your complaint may break the mould. Best of Luck.

defender_of_the_weak

The Ombudsman procedures are included in a document called DISP. Taking the case to an Ombudsman gives a one in three chance (the uphold rate is 31%). Sounds like your adjudicator is fudging based on lack of knowledge or personal bias. Based on some of the comments posted, my bet is lack of knowledge as any adviser would know that policies surrendered early will have been front end loaded with charges.

Under DISP FOS is expected to judge cases based on what was 'good practice' at the time of sale. It is rarely good practice to churn existing plans in favour of new ones, particularly investment linked policies.

If you do appeal the decision, you need to spell out each element of the complaint in words of one syllable. A lot of the Ombudsmen come from a legal background and do not seem to have a great understanding of financial planning so we find that this helps clarify the points in question to be argued specifically

Crazy_Saver

Hi again.

I thought some of you might take the time to read some of the most recent reply from the FOS and give me your honest opinion on whether it is worth me persevering, and asking for my case to be referred to an ombudsman.

Thank you

Crazy Saver

This is regarding the policies that we were advised to cash in and then take out a new one. The original policies were to cover a £48k mortgage, the new one was for £60k.
While I am able to see that the letter did indeed say that 'At the end of the mortgage term you will receive an estimated tax free cash surplus of £47,723', the letter clearly stated an 'estimated' figure, which, like your later policy illustration, would have been based on pre-determined growth rates and was an uncertain figure, not guaranteed. So the estimated payout at maturity of £96,973 at maturity was also estimated, and an uncertain figure and not guaranteed.
I understand this figure was not guaranteed, but at the time, neither my husband or I ever felt that it would be tens of thousands of pounds "out". After all, it may well have reached the target amount. Had we not been advised to, it would never of entered our heads to surrender it.

You have quoted me as saying 'I have seen no evidence that any cost for the additional £12,000 was obtained,' and have suggested that this seems to go along with you point that the adviser did not even consider you keeping your original policies. I cannot agree that this is the case. In my letter I had earlier noted that affordability was a consideration and in the paragraph you have quoted from I went on to point out that the Eagle Star policy provided a greater degree of cover (the total £60,000 required for the new loan) for less than the recorded cost of the £48,000 cover provided buy the two Reliance Mutual policies, before any top up of £12,000 was considered. So while there is no evidence on file that any specific illustration was provided, firstly, the Eagle Star policy was sold in 1991 and firms are only required to keep copy documents for six years. Secondly, it very much suggests the contrary to me, that the £12,000 top up was considered, but that the adviser was effectively able to provide you with 'more for less'.I still don't see why it very much suggests the contrary?

While I am able to see that the 'option' of starting a new policy offering 'more for less' was very likely to have been discussed I have not seen sufficient evidence to persuade me that the adviser actually recommended that you surrender the existing policies. I therefore cannot safely conclude that this was a specific recommendation rather than your own choice.

You have asked if there is any documentation recording the amount of commission that the adviser received for the sale of the policy. The short answer is 'no', but there may be additional pages to the illustration that I do not have copies of. However, this policy was sold in 1991, and at that time advisers were not required to disclose how much commission was earned from the sale of a product. In any case, it is irrelevant, because while I appreciate that the adviser would have earned a greater commission for the sale of the larger policy, I have to consider whether, taking into account all the circumstances, that the sale of the policy was appropriate.How can this be irrelevent if he is supposed to take into account all the circumstances?

You have next, quoted me as having said 'While surrendering policies early is not generally considered appropriate advice, it seems to me quite possible that you might have been disappointed with the performance to date' however, I went on to say 'and by now would be aware that to retain the policies and start a new top up policy your outgoings would be greater than if you were to start a new policy for the full amount'. By a negligable amount, around £10!

You asked what evidence I have to back up this statement. Well, of course, I am expressing my opinion and you go on to say that you had no concerns at all regarding your existing policies. You say 'Neither were we aware that it was considered bad financial management to cancel endowments that were considered to be on target' . The policies had been in force for some four years. I have seen no evidence to suggest that the policies were on target, as you suggest, and indeed, I have already pointed out to you that the total surrender value that you received (£2,608.37) was less than the premiums that you had paid in. I doubt therefore that the policies were on target. I said that I could not ignore the fact that you had received this sum.No eveidence either way apart from what I consider to be the wrong conlusion that he has come to regarding the surrender value. All endowments tend to pay out at a loss if surrendered within the first 5 years don't they?

Other Concerns

You have part quoted my statement that 'a with profits policy would not have been a suitable recommendation for someone who is not willing to take a risk with the repayment of his or her mortgage.' Before determining the outcome, I must consider all the circumstances to decide overall whether you were aware of the risks and whether you were prepared, or in a position to accept the degree of risk associated with this type of policy, because the repayment of your mortgage loan was not guaranteed at maturity. I have to decide whether I believe the policy sold was suitable in your circumstances.

You have mentioned three reasons I gave:

1. being in stable employment - there was nothing to suggest that the employment would not offer an opportunity for career progression. At 29 years old there was also every possibility that alternative employment might later be sought to improve the family earnings. This doesn't mean we would risk our home.
   
2. being 29 years old - The term of the mortgage was 25 years, so the mortgage loan was due to mature when you will both be aged 54. There therefore was and is, a considerable amount of time between now and maturity, and indeed between now and your intended retirement to make up any potential future shortfall.We are not in the financial position to do this due to having a family.
   
3. You had no financial dependents at the time, so there was no additional financial strain on the household income.He has selectively forgotten the fact that the reason for re-mortgaging was to buy a house, get married & start a family. A fact that the advisor was well aware of. We were married shortly after the final meeting with the advisor.
4. While I appreciate that these circumstances do not necessarily constitute a positive attitude to risk, they have not been considered in isolation. I also said that:

1. You were both homeowners with a mortgage loan arranged on an interest only basis and that the loan was supported by two existing endowment policies. This suggests that you were already familiar with this type of mortgage arrangement and that you should have had some idea of how the policies worked, including the fact that the maturity value was not guaranteed.Yes, we should have had some idea, but the reality is, that we had no idea about how the investments worked or that the figures although only estimates, were not going to be pretty close. Surely it's up to the advisor to check our understanding!
2. based on your joint recorded income of £25,000 the loan to income ratio was 2.4 times the joint income, and fell within the lending criteria guidelines for most lenders. This loan would not be considered an excessive strain in terms of affordability.Still doesn't mean we wanted to take risks.
   
3. you were planning to retire at 65. This ties in with your age, the term of the mortgage and your potential ability to make alternative arrangements to meet any future potential shortfall. As mentioned in our original comlaint form, the expected excess was supposed to go towards our pension! We had no intentions of sorting out possible shortfalls as we approached retirement.
   
4. I also said that it appeared that you had achieved some savings, but you have clarified that that was not that case.

In addition to all this, as I explained in my letter, I have taken into consideration the documentation you received at point of sale, the illustrations you were given and the product information. Leaflets, leaflets,leaflets!! Anyone can stick a leaflet into someone's file!!!

So, having taken into account the overall position at the time of advice, I have said that I am not persuaded that I am able to safely conclude that you were not prepared to, or that you were not in a position to take any risk with the repayment of your mortgage. I have therefore said that it is my view that you were not risk averse and that the policy was suitable for you.

Surely"being prepared to" and "in a position to" take risks are two very different things. Just because the adjudicator thinks we were maybe in a position to take risks with the repayment our mortgage, doesn't mean that we wanted to, or were prepared to!

I have noted your comment that you feel that the FOS system appears unfair in respect of working on the balance of probabilities, that you feel that I seem to have been biased, and that in many circumstances where there is little or no evidence I have favoured the firm, not you, the claimant.

Firstly, I explained in my letter that we consider all the information provided by both sides - and on the balance of probabilities. Obviously documentary evidence is important, but we do consider all evidence submitted. Where documentary evidence is not available we have to consider what we think is most likely to have happened in the circumstances. We have to do this because we were not a party to any of the meetings that took place, so cannot know exactly what was and was not said. We most certainly do not favour the firms - as I do not believe I have - we are an impartial service, whose role is to help resolve complaints where the parties have otherwise been unable to reach an agreement.

In your case there was a considerable amount of documentation which I believe provides sufficient evidence for your complaint not to be upheld. I do not agree that I have been biased. You have complained that you told that the mortgage would be paid off and that you would receive a substantial lump sum. You have also said that you were never told that you could be in a position where there could be a shortfall. The physical evidence (the illustration) shows that no binding guarantee was given and that the policy value at maturity was an uncertain amount amount and not guaranteed. The illustration and product information explained the non guaranteed nature and carried risk warnings in this respect. I do not consider the policy to be unsuitable in your circumstances so cannot recommend that the complaint should be upheld.Does this mean that I don't stand a chance because I don't have a binding guarantee of the final payout?

You have also complained is that the adviser recommended that you cancel two existing policies - I do not consider that I have seen sufficient evidence to safely conclude that he did, so cannot uphold your complaint in this respect.There is also no evidence to say that she didn't.

Churn
Unfortunately, I have not been persuaded that I am able to safely conclude that the adviser specifically recommended the surrender of your existing policies. While it seems likely that the subject might at least have been discussed it also seems to me to be more likely than not that it would only have been discussed as an 'option' and that for any one, or more, of a number of reasons, the decision to surrender the policy could just as easily have been your own, given the circumstances. I therefore cannot safely conclude that the sale of the Eagle Star policy was a 'churn'.So many "seems likely" s

Sale
In terms of the suitability of the sale of the Eagle Star policy, I have not seen sufficient evidence to persuade me that you were risk averse or that the sale of this policy was not suitable for your circumstances at the time, which suggest that you were in a position to take, what was at the time, considered to be a small risk for the potential of a greater gain at maturity.

Does this not seem biased to anyone else!!

Sorry it goes on so long

Crazy Saver

mayb_2

Oh dear - what can I say. I have posted a few quotes from our letters here to show you just how arbitary and contradictory the Ombudsman can be. We bought our policy in 1994.

"As indicated in my Provisional Decision, I believe Mr & Mrs ******** interpretation of the verbal guaranteed return of £30,000 to be unsubstantiated and unrealistic given the circumstances prevailing" and also " a return of £30,000 was arguably achievable at the time of the sale"

"Mr "****** (Ombudsman Service) spoke to CIS and established that Mrs **** Pension had been cancelled on the same day as the advice was given" and "from the evidence and information given to me these two transactions appear to be quite separate.":rotfl:

"I have considered all of the evidence and arguments from the outset in order to decide what is fair and reasonable in the circumstances" but also "Despite the fact that specific material could not be recovered, I must explain that we are aware of the nature of the policy taken out from the information usually provided and our own experience of such investments" Funny I though it was our experience and knowledge that was important here. :eek:

From the Service Review Team " An Ombudsman is entitled to place whatever weight he feels appropriate to any piece of information or evidence. It is also the case that he is not required to refer to each point put to him or respond to each and every question asked if he does not believe it will cause him to deviate from his decision.":mad:

There is more......... So judge for yourself if it is worth pursuing. The crux of the matter is really whether you can produce a written guarantee of the final figure. The final quote is from the review team which was echoed by the adjudicator - the last ports of call in the complaint process " We cannot challenge the merits of an Ombudsman's decision or say whether or not the Ombudsman was right to arrive at the decision he has".

I still think you should write and complain - you have come this far and you never know your luck. As I said before though - don't hold your breath but good luck anyway.