Endowment - Really appreciate advice for my mum

alexchegwin

MY mum has got a mortgage question . I would really appreacite some advice. this is her situation (she emailed me it)

huge thanks for any advice in advance.

"We got endowment with Scottish Amicable for £47000 in 1995 for 15 yrs to cover mortgage with Northern Rock for same amount. We moved and reduced our mortgage to £42000. Prudential took over Scottish Amicable soon after. Included in this endowment was a critical illness element up until we made inquiries last year we believed this to be free and part of the policy. When we discovered that we were actually paying for this we felt we had been mislead and pushed into buying this endowment so contacted the FSA. They ruled in our favor for the endowment part but not the critical illness part. In November 08 we got a letter from Prudential to say that they would be a shortfall in our endowment for £1500, this was after we contacted the FSA, so we passed this information on to them. Our endowment is 50% index linked and it is this part that is not doing very well. Given that the endowment term ends in Jan 2010 and should pay out £47000 and the shortfall to date is now £2500 we feel that the offer given to us by the FSA is worrying. The offer is now for £3972.28 that plus surrender value to date of policy would be roughly £41,704. What should we do? Our original mortgage incurred costs of £550 and £1000 we took as cash back per mortgage offer, so total mortgage of £43,500. We work out if we paid endowment now, future payment savings up to Jan 2010 would be £4,800."

Robert_Sterling_3

All endowment policys are a gamble.
The outcome depends on stocks and shares prices.
There is always a warning.
The past is not a guide to the future.
The terms & conditions then say things like.
If your investment goes up 7% a year then you will get this much.
If the stock market goes up by 10% each year you will get this much blah blah blah.
Note the "IF" at the begining of the sentences.
The stocks & and Shares are down at present.
The FTSE Index has gone from above 6000 to below 4000.
The shortfall you mention is a lot less than I would have thought it might be.

You had one win with the Ombudsman.

Count your blessings.

Do not count on getting the final amount which was forcast years ago.
The past is not a guide to the future.
Things could have been a lot worse.
My £6000 in Northern Rock shares went down to Zero. :eek:

Someone else may offer you more comfort than I do.
Best wishes.

silvercar

If you take the compensation (and there is only one calculation so its not negotiable) you can then make a separate decision about keeping the endowment going.

On the face of it you could surrender the policy and continue making the same mortgage payments as you do now and still clear the mortgage.

dunstonh

The FSA do not handle consumer complaints and do not tell providers or advising firms what to pay out.

There is a calcution though and it works on the following principle: if you took the surrender value and redress payment and paid it off your mortgage and converted to repayment basis then you would be no worse off than had you been on repayment basis from the start.

if you choose to remain on endowment basis, you accept the risks for it going down and benefit if it goes up. You cant take a second bit of the complaint cherry.

They ruled in our favor for the endowment part but not the critical illness part.

No surprise there. It is packaged as part of the premium and unless you could show you had no financial need for it they would reject it.