mortgage mis-selling

stephen.spall@ntlworld.co

Just been told that I have £2,100 coming to me from a missold endowment. I need to know if I should use this to pay off part of mortgage or invest the money elsewhere. Please can anyone help.

dunstonh

You complained about being sold an investment product and now you are considering investing that money. Basically you lied and got away with it.

Both options have advantages and disadvantages depending on your risk attitude. In your claim you would have made out you were nil risk, so on that basis you shouldnt invest.

MortgageMamma

£2,100 is hardly an amount worth investing in anything other than an ISA. Perhaps you should spend it or stick it into your pension plan or something.

EdInvestor

You will receive a better return than savings if you use it to reduce the amount owed on the mortgage.

dreamylittledream

dunstonh wrote:

You complained about being sold an investment product and now you are considering investing that money. Basically you lied and got away with it .

Both options have advantages and disadvantages depending on your risk attitude. In your claim you would have made out you were nil risk, so on that basis you shouldnt invest.

That is a rather harsh comment!

Lets not forget that investments (such as deposit accounts) can be no risk - not just capital and interest mortgages.

And equally a complaint has been upheld becuase the policy was not suitable for his needs at the time. This does not neccesarily mean that it did not fit his attitude to risk. As you have not seen this guys complaint how do you know he 'made out hewas nil risk'?

Lets not forget the current FOS view is the endowments are very rarely suitable vehicles for the repayment of a mortgage - not just for reasons relating to risk.

At any rate this guy was merely looking for advice - not for an accusation of lying!

to the OP - As for what to do with the compensation? That is entirely your choice. If you want to properly know your options (including what to do with the policy) I'd recommend consulting an IFA

stephen.spall@ntlworld.co

Thanks for the comments, good and bad! I did not lie, my fund is still £8000 short. You do not know my circumstances at all. I am going to pay it off my mortgage now anyway. So thanks for nothing dunstonh!

vinno65

Hi Stephen,
the whole point of this redress is to put you into the position you would have been had you not been sold an endowment. What Dunstonh is saying (maybe a liitle harshly!)is that as you presumably complained that the risks weren't explained to you at the point of sale and you have won on this argument it would be a little strange to start talking of investing the money. If you genuinely want a (relatively)risk free mortgage(though only if you keep up the repayments) you should take the redress amount of £2100 add that to the surrender value of the endowment and use this lump sum to pay off part of the capital of your outstanding mortgage. Convert the remainder to a repayment and you should then be in the same position you would have been in had you taken out a repayment mortgage at the outset. Remember the firm who miss-sold you should cover the cost of converting. Hope this helps.
regards Vinno

EdInvestor

Post some info about the endowment, just so we know that surrendering/selling it and using it to reduce the mortgage is the best way.

Provider company
Guaranteed sum assured
Declared bonuses
Surrender value (ring up and ask)
Monthly premium
Maturity date
Maturity projections

aloiseb

I know there's a shortfall on our endowment policy, becasue we had a letter advising us, and we've acordingly made our mis-selling complaint. But my question is, with there being only a few years left to run on the endowment, is there not a possiliblity that it might be better to leave it to run its full term?

If we surrender it now and take the surrender value (which I always understood will be much lower than if we let the thing run full term...but that might have been salesmanspeak) add it to the compensation (if any) and convert to a repayment mortgage, we might get less of our mortgage paid by the endowment, and therefore end up repaying more, than if we let it run full term.

Then again, the endowment's performance could be even worse than they are now predicting, and then we'd have been better off surrendering it now, etc etc.

Is that correct? (you can understand how these people make their wages...why can't I get my head aroudn money?)

dunstonh

If we surrender it now and take the surrender value (which I always understood will be much lower than if we let the thing run full term...but that might have been salesmanspeak)

No, its partially correct but also could be wrong. One of the main reasons for it being mentioned a lot is that tied agents are not allowed (officially) to recommend the cancellation of plans, even when its naff. There is a little more to it than that. Such as:

fund(s) you are invested in and others available
financial strength and potential of with profits (if in with profits)
ongoing charges if continued
ongoing charges if made paid up
charges if you surrender
need for lifecover and alternative cost
taxation on surrender (mainly if higher rate taxpayer)
target growth rate
penalty free exit points (ie can surrender after x year to avoid penalties, do you wait until then)

EdInvestor

aloiseb wrote:

But my question is, with there being only a few years left to run on the endowment, is there not a possiliblity that it might be better to leave it to run its full term?

I would say there are a very few cases where it would be definitely better to hold to maturity because of a high guaranteed value. There are a few more cases where there is a strong likelihood that it would be better to hold.There are some cases where ill health and age means that the policyholder would have great difficulty replacing the life cover at a competitive rate.There are windfall considerations at Standard Life.

But in the vast majority of cases that I've seen, it's better to surrender.

This is mainly because of the change in investment conditions (to the low inflation/low interest rate environment) and regulations (particularly affecting WP funds) since the policies were issued. This has meant the design of the policies (especially the charges levied on both the investment and life cover side) are no longer in line with the modern realities.The policies are no longer fit for the purpose they were supposed to fulfill.