Endowment vs Repayment

AllieB

I have recently complained about 2 endowment policies I was sold in the 80's. One company has refused outright on time grounds but the other has upheld my complaint and agreed that I was missold the policy. So far so good.

They then go on to "prove" that I am BETTER off with my endowment policy, (so their offer is mererly to pay the charges if I want to cash in my policy and pay off my mortgage and convert to a 100% repayment one - which I don't).

Even after a week, and looking at the figures several times, I just cannot see how they can compare an endowment that is forecast to pay £17,000 on a £27,000 loan and say that I am better off than if I had taken out a repayment mortgage, which would I presume have paid off the entire £27,000 in 5 years time! [is there such a scenario as a repayment mortgage that wouldn't pay off the full amount in the specified timeframe?!]

Has anyone had experience of this? I don't know what to do now and I have only 3 weeks to accept/decline their offer. (Which I think is poor advice, since I would not have thought it prudent to cash in an endowment policy 5 years from maturity when the current value is only £12,000!)

Thanks for listening to my rant! :mad:

Allie

BACKFRMTHEEDGE

Don't know about your situation but last year I received compensation for an endowment taken out in 1993. The compensation only amounted to £700-£800 on the grounds that when our position was compared with the difference financially had we taken out a repayment mortgage, this is all the difference was. They calculate compensation on the cashing in value of the endowment + money received from windfall shares versus how much you would have paid of your mortgage with a repayment. Endowments came with big promises of additional profits over and above what you could pay off with a repayment style mortgage and it was these additional profits which never materialised. I think policies from the 1980's have performed well because thay came with good profits early on. Thus, it's possible that you are one of the lucky one's who have made more money than you would have done if you had had a repayment style mortgage....the endowment just didn;t live up to it's promise of extra profits. Hope that makes sense. :rolleyes:

AllieB

Thanks, yes it does make sense, but my endowment hasn't performed at all well. The original policy was for £27,000, and is currently due to pay back only £17,000, leaving me £10,000 to find (and I have already put a repayment mortgage in place to cover that).

It's interesting you mention windfalls, I haven't had them, but I did have two bequests in the time of the mortgage and have paid off about £6k over the time of the policy - I hope they aren't penalising me for being prudent in paying off a bit of the debt!

Allie

BACKFRMTHEEDGE

Windfalls shares - as in when a building society turns into a bank and gives its customers free shares which can then be sold - these are taken into a/c when compensation is calculated....there is another thread on this board that might interest you started by mercurystar999 entitled had an endowment offer.TTFN :money: