Pension Mortgages

shoc231

I am 63 years old and my husband is 64. We bought our house in 1986 . The Insurance Company we were with at that time advised us that instead of taking out an endowment policy to take out a further pension policy together with one he already had out and that at the end of the 25 years we would be get the sum of money we had borrowered from the Society. At the time of the purchase we sent an undertaking to the Society stating that under the provision of the policies we were entitled to exercise the right to receive not less that the amount of the loan. We also sent a Direction to the Insurane Company stating this.

My husband is coming up to retirement and I phoned the Insurance Company to enquire about these policies and was told that they were pension policies and we could only take 25% of the value and this will not pay off our mortgage.

Is there anything we can do about this.

EdInvestor

How much is the shortfall? You will need to start overpaying this amount or switch it to a repayment loan - or extend the term of your mortgage.

There was always a risk that the pensions would not perform, in much the same way as endowments eventually failed.Who sold you the pension policies?Did they tell you there was a risk of shortfall?Unfortunately sales of these products were not regulated in 1986 so it is probable you cannot claim for misselling, but it may be possible if it was a direct sale from a big insurer..

dunstonh

in 1986 you could take 3 times the annuity payable (typically) as the tax free lump sum. However, in 2006, the Govt changed the rules and made it 25%. It was possible to apply for some protections which have allowed larger lump sums to be paid still but most people didnt unless it was a large amount.

Is there any guarantees on the pension? often pre 1988 plans did have some pretty good guarantees in place.

shoc231

We were not told at the time that there could be any shortfall and that we were guaranteed that this sum would be available when when my husband retired. As I said a Notice was sent to Prudential at the time instructing them that at the end of the Mortgage this amount was to be paid to the Society.

shoc231

The sales people from prudential . It was the area supervisor who advised us that this was the best plan and never said that there could be a shortfall and as far as we were concerned this money would be guaranteed to clear the mortgage.

dunstonh

You should complain. However, if the only reason for shortfall is the change in the lump sum entitlement, then that may not be easy as there was no way in 1986 that they would know that the govt moved the goalposts in 2006. So, that one would be interesting.

shoc231

I have asked them for a complaints form and I will let you know how I get on. Would it make any difference having copies of the documents which were sent to prudential and the building society at that time confirming that this amount would be available?

dunstonh

Complaining makes sense and statistically, pension mortgages are very hard to justify. They were a good idea for some (higher rate taxpayers) but really close monitoring was needed. Not the sort of thing you get direct from an insurer.

The document copies you have supporting your case should be supplied as it will be an evidence based review by the complaints team. Plus, from that long ago there may be balance of probability decisions and in those cases, the side that is most credible tends to win. if you have docs and they dont, they will work in your favour.

shoc231

I have received the claims form. Should I fill this in myself or should I seek advice from someone? I don't know what to do for the best

dunstonh

You could seek advice from an IFA but they are likely to charge a little for it. A claims company will want a massive amount and their interest doesnt tend to be in areas like this.

To be honest, you have explained it very well in this thread. Focus on the risks not being made aware and also mention the reviews you have had since taking it out to tell you if its on track or not (my guess is that you had none and that is not good as you need them with this type of investment backed mortgage)