Legalised piracy?!

Wot_Gorilla

I can go into/find out more details if considered necessary, but I thought I'd run this past you folk to see if anyone sees anything which might help, or whether it is actually legalised piracy!

As nutshelly as possible then...

Our mortgage comes to an end [25 years] this year. It was covered by two endowments. [Stop laughing at the back! :rotfl:] One shorter one, and one which has run for the entire 25 years.

About 5 years ago I used one of the firms recommended in here re: potential mis-selling. The original endowment provider admitted mis-selling, but the figures - remarkably! - were marginally in our favour. [When worked out as the alternative repayment.]

However... does what has happened in the interim make any difference? Only...

Last December we were told the final bonus percentage had dropped from 26% to 23%. Clearly fearful it might drop some more, I spoke to the provider in Feb; wondering if it might fall as much as another 3% before the end of the term. [This December.] "It could."

So, imagine my surprise [understatement of biblical proportions] when I called up last month to find that in July it had been reduced to "12% for all customers whose 25 year endowments mature this year." An outrageous 11% drop in 6 months - it's almost like the preceding 25 years isn't even taken into account! And feels like they can bung in any arbitrary figure they feel like! That's effectively cost us another £2.5k in the relative blink of an eye!! :mad:

Any thoughts?

[PS: Incidentally, this now means that the original predicted return of circa £38k is now barely likely to make £17k on a £22k endowment over those 25 years.]

dunstonh

About 5 years ago I used one of the firms recommended in here re: potential mis-selling.

This site has never recommended any claims firms. There is no point with endowment claims.

but the figures - remarkably! - were marginally in our favour. [When worked out as the alternative repayment.]

Not a surprise. Many suffered in the tech stocks crash but came right during the subsequent recovery.

However... does what has happened in the interim make any difference?

No. You made the choice to stick with the endowment despite knowing the risks. You could have surrendered at the time of the complaint and gone with the no risk option. You decided against that.

As no-one gave you any advice at that time you cannot now complain about that [non-existent] advice.

So, imagine my surprise [understatement of biblical proportions] when I called up last month to find that in July it had been reduced to "12% for all customers whose 25 year endowments mature this year." An outrageous 11% drop in 6 months

Where have you been for the last 18 months? The stockmarket dropped over 40%. Fixed interest sector invesmtents dropped over 20% and commercial property dropped over 50%. So, a reduction of 11% seems quite good when put in context.

it's almost like the preceding 25 years isn't even taken into account!

The bulk of the money hasnt been invested for 25 years. If it had been, then things would be a lot better. The bulk of the money is invested at the end and you have suffered two major economic events in quick sucession near maturity. Thats why you had such a hit. Things have been improving recently and the figures could improve a bit by maturity. However, its unlikely to be much unless you are unit linked.

hedgehunter_2

The maturity value will be at the level the life company sets for a 25 year policy maturing in December 2009.
They cannot just do as they like. The level of terminal bonus is the difference between the guaranteed benefits (the sum assured and that annual bonuses added) and asset share.

Asset share is the accumulation of your premiums plus smoothed investment returns over the term less taxation and expenses. It is therefore variable in value.

The life company has to demonstrate to the regulators that sample policies fall within a range of asset shares, so in reality thay cannot just declare any level of terminal bonus they like.

You have invested one premium for 25 years, and a total of all premiums paid for one month.

The world has changed since 1984 and an expectation of a 38K maturity value on a 22K low cost endowment is no longer reasonable.

Wot_Gorilla

dunstonh wrote: »

This site has never recommended any claims firms.

Really? It must've been in the days when I also had emails from moneysupermarket and motley fool, too, then.

dunstonh wrote: »

You made the choice to stick with the endowment despite knowing the risks. You could have surrendered at the time of the complaint and gone with the no risk option. You decided against that.

As no-one gave you any advice at that time you cannot now complain about that [non-existent] advice.

Actually I was advised by a financial adviser not to cash-in the endowment - all things considered. [Crystal balls notwithstanding!] In fact, the net surrender value in 2006 is still circa £1k lower than the expected return in December. [Apparently not likely to be tweaked again, as they only tweak their figures twice/year.]

dunstonh wrote: »

Where have you been for the last 18 months? The stockmarket dropped over 40%. Fixed interest sector invesmtents dropped over 20% and commercial property dropped over 50%. So, a reduction of 11% seems quite good when put in context.

Given the endowment was about to mature, and given my belief [seemingly hugely ignorant/naive - take your pick, it would seem!], I honestly didn't think it would have such a dramatic late impact. [Indeed, the last letter from the endowment company - the regular annual shortfall warning one - was still predicting a sum circa £2.3k higher in February.

It's just left a really bad taste. If we'd put the same amount - starting from zero - in a building society every month for 25 years [according to an online calculator for that period] it would've amounted to virtually the original £22k! Circa 30% better return... in a bloody building society account! :rolleyes:

hedgehunter wrote: »

The world has changed since 1984 and an expectation of a 38K maturity value on a 22K low cost endowment is no longer reasonable.

Yer not kidding!

But thank you both for your input.

Damned shame about that yacht and island in the Indian ocean, though. 25 years ago I was foolish enough to dream. _pale_

dunstonh

Actually I was advised by a financial adviser not to cash-in the endowment - all things considered. [Crystal balls notwithstanding!] In fact, the net surrender value in 2006 is still circa £1k lower than the expected return in December. [Apparently not likely to be tweaked again, as they only tweak their figures twice/year.]

If it was a tied agent of the insurer involved then they have to say that. Its a limitation of their authorisations. If it was an IFA then they would have potential liability. However, its probably impossible for you to prove anything as these are usually done unofficially. If you paid a fee and had a letter of recomendation then you have scope (although if the adviser did it like that then chances are they would have been compliant as well).

Your timing sucked basically. Your best hope is for Doctor Who to pay a visit and ask him to go back to when you bought it

ILW

Wot_Gorilla wrote: »

.

It's just left a really bad taste. If we'd put the same amount - starting from zero - in a building society every month for 25 years [according to an online calculator for that period] it would've amounted to virtually the original £22k! Circa 30% better return... in a bloody building society account! :rolleyes:

. _pale_

Sorry to say it but you did go for a higher return with the associated risk. In the end you took a gamble which did not pay off on this occasion. Sad but true.

Wot_Gorilla

dunstonh wrote: »

Your timing sucked basically. Your best hope is for Doctor Who to pay a visit and ask him to go back to when you bought it

I knew something would be possible!

Oh, and yeah, the IFA [two separate ones in the past decade-ish] more than covered themselves in jargon and vagaries. So, no real blatant issues with them.

Wot_Gorilla

ILW wrote: »

Sorry to say it but you did go for a higher return with the associated risk. In the end you took a gamble which did not pay off on this occasion. Sad but true.

Well, two things... It's always easy with 20-20 hindsight, but when you're 20 years old; not only does 25 years seem a long way off, the promise of 'apparent' riches are just as intangible. Of course, now, with 25 years wisdom on-board and reality biting our !!!!!!, uh, a little cynicism has crept in. :rolleyes:

ILW

But if it had paid off, you would have been sitting pretty. Some you win, some you lose. Many did well with endowments about 15-20 years ago.