Mortgage Settled but Endowment Still Running - Advise needed!

Binbun

Hi Everyone

Can anyone offer some endowment mis-selling advice please, I'm in the position where I still have endowments, which I am relying upon, but the original mortgages have ceased due to a divorce.

I have two endowment policies one from 1987 for £20,600 and a second from 1989 for £5,000, both arranged by the old Leeds Permanent BS with Norwich Union. Both NU policies are still running and I discover have substantial shortfalls. However, the original mortgages that these covered are no longer in existence. They were paid off to the Halifax (who took over Leeds Perm) in Jan 2005 when my ex husband and I divorced! Family home was sold and these endowment mortgages and a further repayment mortgage were settled. We decided to keep the policies running jointly and made our son the beneficiary of them when they mature in 2012.

Thanks to MSE advice, I have taken the plunge to complain about our endowment policies taking on the smaller 5K policy first. I filled in the questionnaires as best I could and after a couple of weeks have been told the Norwich Union have upheld the complaint. I have now had an offer of £570 ex-gratia payment and I am not sure if this is a fair offer. They say the policies present value is £2100. Nevertheless, a couple of things puzzle me in the offer (although the whole calculation I do not really understand) Firstly, they have said that their calculations have taken into account that the mortgage has already been repaid, but don’t say how this has affected the offer.
Would this have made the offer less? I hope not, I cannot see that is fair if it has! Although this mortgage is repaid I have had to start again post divorce and now have a massive repayment mortgage round my neck for the next 24 years remaining (I'm sure I'm not the only one who's been here). I was hoping that when the policy matures it would give my son a decent amount of cash to help with his student fees/loan etc.

Secondly, they say that their calculations show that outgoings for an endowment mortgage have been less than those under a repayment mortgage and have excluded this amount from their calculations. What on earth does this mean? Has that made the offer less too? I'd like to try and understand a little better before I send off the £20k complaint to the Halifax.

The NU says my choices are to:
Accept the offer and surrender the endowment and life cover will cease.
Or
Accept the offer, keep the policy running, and accept the risks.
Or
Reject the offer.

What is best to do with endowments these days? Should we keep them going or should we surrender them? I've always thought it was a bad move to cash in your endowment, and wasn’t expecting the NU to offer this as an option. Although I haven’t tackled the Halifax yet to complain, I have a two year old statement from the NU that suggests that the 20k target endowment is projected to reach 13.5k at maturity. How accurate are these projections now? Can we trust them?

I was typically mis-sold these endowments in the 80's boom, with the promises of profits like many people. I was asked in the questionnaire what I would have done if I hadn’t taken the endowment, and knowing what I know now, I answered I may have taken a repayment. But, I can’t honestly say I know what I would have done as I wasn't offered an alternative! I assume that’s why they have compared the two in their compensation calculation.

Any advice on what I should do would be greatly appreciated.
Many thanks

silvercar

I answered on the sticky thread, but here again:

The compensation is designed to put you in the situation you would have been had you taken a repayment mortgage in the first place; it is not designed to give you the "promised" target amount.

The theory is that you would have always paid off your mortgage when you did so this is taken into account in the calculations. They would have compared the costs of the endowment mortgage with the theoretical repayment costs upto the point at which you paid off your mortgage.

their calculations show that outgoings for an endowment mortgage have been less than those under a repayment mortgage and have excluded this amount from their calculations

So you are not due any compensation for this as your costs have been lower.

I have now had an offer of £570 ex-gratia payment

I would guess that this is to reflect the fact that you have continued to pay premiums even after paying the mortgage off.
I would say you are lucky to be offered an ex-gratia payment, compared to what other people have reported.

The NU says my choices are to:
Accept the offer and surrender the endowment and life cover will cease.
Or
Accept the offer, keep the policy running, and accept the risks.
Or
Reject the offer.

Some would say you complained the policy was missold so you should now surrender the policy, after all you said you were missold it.

In practice you need to decide whether it is worth keeping on. Post some details on here of the bonuses, assured sum, monthly premiums etc and I'm sure experts (not me!) will advise.

Rather than surrender the policy you may want to try and sell it (search TEP - traded endowment policies - on google).

If you reject the offer you may have to wait ages for the ombudsman to make a decision. By which time the offer could be withdrawn and you would lose the payment offer. All the endowment companies use set calculations to determine compensation so I dodn't know that you would gain anything by rejecting the offer unless there are other circumstances to those you mentioned that haven't been taken into account.

Binbun

Hi
Sorry, new to the forum, relised after posting I probably should have started a new thread.

Thanks for explaining Silvercar.

I'm not sure if the offer is because I have continued to maintain payments after mortgage settlement. The monthly premiums are only £8.70 on this one, and its been running for a year since the mortgage was settled. It has 7 years left till maturity. As does the larger endowment that I haven't tackled yet.

Here are some details if anyone can help further.
Mortage/target amount £5,000 over 25 years started 1989
premium is £8.70 per month
Statement for 2004 advised projected final amount at maturity to be £3,240 at 4% each year or £3,480 at 5%.
Last bonus statement I have is for 2001 and was £43.00.

The other is
Mortage/target amount £20,000 over 25 years started 1987
premium is £27.23 per month
Statement for 2004 advised projected final amount at maturity to be £13,400 at 4% each year or £14,400 at 5%.
Last bonus statement I have is for 2001 and was £191.00

I accept your comment that if the policies were missold then you should now surrender it, but like most I would like to maximise what I get out of it. If I surrender it I loose its life cover which is guaranteed to pay out the target, and its current value is much less than its projected target at 4% (if that figure can be relied upon).

Many thanks

EdInvestor

Hi Binbun

Please also post the

Surrender value ( you may have to ring up)
Guaranteed sum assured
Declared bonuses so far

n

Binbun

Hi EdInvestor

Thanks for the reply
Surrender Values today are £9,028 for the first endowment and £2,106 for the second.

I'm not sure of the current bonus' as I dont have copies of current bonus statements, I have asked the NU for them today and they are posting them to me.

Guaranteed sum insurred was 7,105 or £20,655 on death in 2001
and £1,885. or £5,000 on death

Bonuses, again last statement I have is for 2001 where the Total regular bonus was quoted as £4736, being £4545 from previous years plus £191 for that year.
And £925, being £882 from previous years plus £43 for that year.

I have phoned NU for some general clarification and they have now told me that they have a 'Our promise to policyholders' which subject to certain conditions I could receive a max. of £2555 and £760 on the individual policies which will go someway towards the shortfall. This isn't guarenteed and depends on there being enough money in the fund at maturity. Apparently they have to give us 3 years notice of your final 'promise' figure. The max figure they are quoting is based on the projected shortfall as it stood in 1999. At the moment NU are advising that the promise is likely to meet the 'promise' max value, but time will tell. They have also said that these investments are picking up so they are advising that policies aren't sold, but keep running.

I'm wondering if its worth selling them and putting the money in mini ISA's for the next 7 years, rather than hope they meet the projected values at 4% with a possible shortfall 'promise' payout.

Thanks Binbun