Endowment - confused

Rainey_Day

Hi everyone
I don't know if you could give me some advice? But here are the facts:

My parents-in-law were sold an endowment in 1986. Recent correspondence has shown that there will be a shortfall on its maturation in July 2006. The assurance company was taken over in 1994 and the purchasers are claiming that they do not accept legal liability for any advice given before that date.

My father-in-law is due to retire in June 2007 and the endowment was to cover the original mortgage and loans taken out in '86.

However, he has recently been made redundent and used this money to pay off the mortgage - so the endowment will now go towards his retirement.

I have looked at the information provided on the suggested website and, despite being simple, I am getting really confused!

I am going to write to the Assurance company in question to ask for the endowment documentation, but am wondering if their cause is lost due to the mortgage/loans no longer being current?

I believe they have already contacted the FSA who have said they cannot help.

Can anyone help, or steer me in the right direction?

Many thanks
Rainey

Garry_Anderson

I am quite sure remember reading in take-overs, that they not only take over the business and goodwill - they take over all legal liabilities as well.

i.e. It cannot be a tool to escape illegal or wrongful acts.

They cannot just take over the good stuff - they have to take over bad stuff also.

See a lawyer to make sure.

dunstonh

I am quite sure remember reading in take-overs, that they not only take over the business and goodwill - they take over all legal liabilities as well.

It is very rare for advice companies to take over the legal liabilities of other advice companies. Although it would depend on whether it was an insurance company takeover or an advice company takeover. some of the purchases do not involve the advice company which often operated as separate limited company to the life company and when the life company was sold, the advice company was closed down and liquidated. That give the life company no liability with the advice being given by a limited company that is no longer in existence. That passes the responsibility to the FSCS but they wont be interested in this case as its sold before 1988.

They cannot just take over the good stuff

Yes they can and yes they do. Agency transfers mean that the new advisers are taking on the ongoing servicing rights and not the selling responsibility. Its no different to walking into another IFAs office and asking them to switch all your policies to them. That IFA doesn't suddenly have the liability for the original sale.

I am going to write to the Assurance company in question to ask for the endowment documentation, but am wondering if their cause is lost due to the mortgage/loans no longer being current?

Can you name the companies involved. We need to know whether its an advice company or an insurance company tied sales force. Either way, a 1986 policy was sold before consumer protection came in during 1988 so they are within their rights to reject it on those grounds if they wanted to.

EdInvestor

Hi Rainey

Rainey_Day wrote:

My parents-in-law were sold an endowment in 1986.

By whom? Ring up the life company and ask if they sold it to your parents, or, if not, who did.

Recent correspondence has shown that there will be a shortfall on its maturation in July 2006.

This is surely not the first your parents have heard about this, is it? Most people have been receiving "traffic light" letters for several years.

The assurance company was taken over in 1994 and the purchasers are claiming that they do not accept legal liability for any advice given before that date.

This may or may not be relevant if someone else sold your parents the endowment, not them.Please tell us the name of the companies.

My father-in-law is due to retire in June 2007 and the endowment was to cover the original mortgage and loans taken out in '86.However, he has recently been made redundent and used this money to pay off the mortgage - so the endowment will now go towards his retirement.

If a misselling complaint succeeded, redress would only go up to the point at which the mortgage was paid off.

I am going to write to the Assurance company in question to ask for the endowment documentation

You will probably find they have lost or destroyed it, but this doesn't matter.

but am wondering if their cause is lost due to the mortgage/loans no longer being current?

Not a problem.

The key factor is who sold you the endowment.If it was an IFA, you have no hope.If it was a building society,bank or the policy provider, you may be able to make a claim.

Garry_Anderson

GA> I am quite sure remember reading in take-overs, that they not only take over the business and goodwill - they take over all legal liabilities as well.

Dunston> It is very rare for advice companies to take over the legal liabilities of other advice companies. Although it would depend on whether it was an insurance company takeover or an advice company takeover. some of the purchases do not involve the advice company which often operated as separate limited company to the life company and when the life company was sold, the advice company was closed down and liquidated. That give the life company no liability with the advice being given by a limited company that is no longer in existence. That passes the responsibility to the FSCS but they wont be interested in this case as its sold before 1988.

I believe you will find that any takeovers of business involve them taking on liability of prior dodgey contracts - which is why he should see a lawyer.

I doubt the tax man would let them get away with owing large amount tax liability after being taken over

dunstonh

I believe you will find that any takeovers of business involve them taking on liability of prior dodgey contracts - which is why he should see a lawyer.

You may well believe that but you would be wrong. Companies buy the agencies or transfer the agencies. There are even companies out there who act on behalf of retiring advisers (and others leaving the industry) to sell their agencies.

Garry_Anderson

Dunston> You may well believe that but you would be wrong. Companies buy the agencies or transfer the agencies. There are even companies out there who act on behalf of retiring advisers (and others leaving the industry) to sell their agencies.

I should not need to state the obvious.

Rainey Day wrote, "The assurance company was taken over in 1994..."

I am quite sure this would be considered a continuation of the predecessor company i.e. they are continuing the business.

Nevertheless - I would seriously advise Rainey to see a lawyer and not take your or my word on this.

dunstonh

Rainey Day has given some conflicting information which is why both Ed and myself have asked for clarification. There are a few scenarios which could apply here and we dont have enough information to know which it is.

I am quite sure this would be considered a continuation of the predecessor company i.e. they are continuing the business.

If it was a life company that was purchased, that is one thing. If the advising company was a standalone limited company and that wasnt bought, then the new owners of the life company have no liability for that other company as they never bought it.

Or it could be that they were FIMBRA members but ceased before 1994.

So, until we have more information, we could all be right or wrong.