Endowment Response from Norwich Union

sbcurran

Hi Folks

Following the advice previously sought I convinced my wife to make a claim on being mis-sold her endowment policies.

Norwich Union have upheld the complaint on the basis that the policies were not suitable but stated that it was due to 'insufficient information being available from the time of sale and not as a result of the actions of Mr X and Mr Y, the representatives who sold these policies'.

At the time of taking out the policies my wife was gauranteed to have the mortgage paid off by the age of 55 with an additional lump sum and was therefore expecting to retire at 55 years old. Norwich Union have stated that as this is not the normal retirement age they will recommend that the terms remain at 22 and 25 years. They have however stated that by providing documentary evidence showing her normal retirement age (e.g. pension scheme details) they will look into the matter again.

Any advice on this? Surely if my wife was expecting the mortgage to be paid off by 55 years old including a lump sum and the fact that she has been paying into a pension for 16 years with the prospect of another 14 years when she would be 55 would be sufficient enough evidence?

Any advice would be appreciated.

Thanks
Sean

dunstonh

Any advice on this? Surely if my wife was expecting the mortgage to be paid off by 55 years old including a lump sum and the fact that she has been paying into a pension for 16 years with the prospect of another 14 years when she would be 55 would be sufficient enough evidence?

So far, NU have said that there is not enough evidence to support your claim of a mis-sale but there is not enough evidence to fully support the adviser. This is very common with older cases where the importance of documentation wasnt that high. Something the industry is learning the hard way.

It would be very easy for you to say your wife is retiring at 55. Heck why not make it 50 Hence why they want evidence of this. Pension documentation showing a retirement age of 55 would support this perfectly.

Without anything to prove a retirement age and affordability to retire at age 55, then there is very little you can do about it.

vinno65

Hi Sbcurran,
Is your wife in a works pension scheme, if yes then it should be quite easy to show when she is due to retire. Again as Dunstonh likes to point out if you have no documentary evidence then you are obviously a liar and because the firm hasn't kept the documents from the sale(although you'd think they would keep them for the life of the product they are selling, makes sense to me!) they can't be expected to believe what you are telling them now. This however flies in the face of the guidance issued by the head of the FSA John Tiner when he wrote to firms telling them that the FSA expected them to take verbal evidence as good and sufficient evidence.
regards Vinno

EdInvestor

sbcurran wrote:

Surely if my wife was expecting the mortgage to be paid off by 55 years old including a lump sum and the fact that she has been paying into a pension for 16 years with the prospect of another 14 years when she would be 55 would be sufficient enough evidence?

When you take out a (personal) pension you are asked to choose a "Normal Retirement Date" (NRD) which is then noted on the policy and it is at this point that the policy officially matures.If your wife chose 55 as her NRD 16 years ago, there should be no problem, just provide a copy of the pension documentation showing this to NU and they should pay up.If however the NRD shown is 60, I suspect you're out of luck.

Note to other readers: for maximum flexibility it is always wise to choose the minimum possible age to take pension benefits ( currently 50, due to rise to 55) when taking out any pension policy.This is because if you take the pension at a date different from the NRD, the insurer may impose a penalty for breaking the contract by not waiting till the policy matures.

You never know when you might need to take a pension early for extra income,redundancy is now a fact of life for the over-50s regardless of their skills, so it's best to be aware of this, even though when you're young and signing up for the pension it tends not to cross your mind.

dunstonh

Although vinno assumes everybody was mis-sold, there are a great number of people who are trying it on and documentary evidence is the key driver in whether you get redress or not. I havent called you a liar but stated the position that NU are taking and why.

Under older rules, the paperwork needed to be held on for 6 years from commencement of the policy. A number of firms did that. However, with hindsight, that is now proving to be a problem for them in that they cannot support the advice that was given. So, you often get the response that they cannot prove it was mis-sold but they cannot prove it wasn't and therefore they uphold the case. Basically because the onus is on the company to prove it wasnt mis-sold.

The infromation NU have is that the retirement age was not recorded as 55. You are now saying it is. So NU are quite right in asking for proof that your retirement plans match 55. They have paperwork that records it at 55. So, they are now asking for paperwork from you to prove that was wrong.

This however flies in the face of the guidance issued by the head of the FSA John Tiner when he wrote to firms telling them that the FSA expected them to take verbal evidence as good and sufficient evidence.

This is not strictly true and is only of use where there is no evidence to the support the opposite. Where there is documentary evidence showing something, then information verbally stating something different is not going to be sufficient. Do you honestly think that John Tiner meant that companies should totally disregard all paperwork and assume everything said by one side should be treated as right?

TangentMan

vinno65 wrote:

Hi Sbcurran,
Is your wife in a works pension scheme, if yes then it should be quite easy to show when she is due to retire. Again as Dunstonh likes to point out if you have no documentary evidence then you are obviously a liar and because the firm hasn't kept the documents from the sale(although you'd think they would keep them for the life of the product they are selling, makes sense to me!) they can't be expected to believe what you are telling them now. This however flies in the face of the guidance issued by the head of the FSA John Tiner when he wrote to firms telling them that the FSA expected them to take verbal evidence as good and sufficient evidence.
regards Vinno

This presupposes that everyone making an endowment claim was mis-sold and is not just having a go for some free money. We know this is not the case, we know that some people are chancing it.

It is easy to assume that banks, mutuals etc are faceless companies that have loads of money so who cares - but the more their costs are increased, the more we have to pay for services.

vinno65

Hi Dunstonh and Tangent Man,
I do not assume everyone was miss-sold, as much as i would hope you don't believe everyone making a claim is a chancer.
Let's look at some facts. Evidence from the FSA, the consumer's association etc put before the treasury select committee says tha over 50% of people interviewed said they were told their endowment would definately pay off their mortgage. "Told", you won't find guarantees in product literature but it is an example of the sharp practices used to sell these policies. The evidence shows the majority of policies were miss-sold.
As to paperwork, why would any firm get rid of paperwork pertaining to the sale of a 25 year product after 6 years! It beggars belief, and don't quote the data protection act its hogwash. It is far more likely that the documentation never existed. This is why miss-sale complaints are upheld. You may bleat on that the poor firms are only upholding complaints for lack of evidence but whose fault is that?
Hundreds of thousands of people are complaining that the risks were never explained and that they were promised that their mortgage would be paid off with a surpluss.Are you suggesting they are all lying chancers? If the fact finds etc had been done then surely the firms would have held on to them as proof that a sale was compliant? Why would they leave themselves open to what is happening now?
Finally in your heart of hearts and be honest, what percentage of customers, having had all the risks explained to them, all the charges that they are paying explained to them, and the fact that after 25 years there may not be enough money to pay off the mortgage(let alone a surpluss) and that their might be a whacking great shortfall aswell, how many do you believe would have risked their houses (the biggest single investment in most peoples lives)
on a gamble on the stock market.
I put it to you that most endowments had to be miss-sold to be sold!
regards Vinno

dunstonh

As to paperwork, why would any firm get rid of paperwork pertaining to the sale of a 25 year product after 6 years! It beggars belief, and don't quote the data protection act its hogwash.

No it's not. I remember back in my tied days that the lowest graded clerks used to have to clear out the cupboards of anything that was over 6 years old. It was normal back then.

The other, possibly more likely thing, is that the paperwork was treated as low priority. There have been many reports of the client files being stored in warehouses in a not too orderly fashion with papers falling out and whole boxes missing or misplaced.

It is far more likely that the documentation never existed.

Thats hogwash. Although the further back you do, the less likely there was anywhere near enough to satisfy the requirements.

This is why miss-sale complaints are upheld. You may bleat on that the poor firms are only upholding complaints for lack of evidence but whose fault is that?

I don't think you will find anyone complaining or bleating on about that. However, it is factual that most are paid out not due to acutal confirmed mis-sale but due to insufficient documentation to support the sale. Stats I have mentioned before that out of 1000 complaints, only 25 are upheld on the basis of actual mis-sale. A further 225 are paid redress because of insufficient documentation to support the sale. The rest were not upheld.

Hundreds of thousands of people are complaining that the risks were never explained and that they were promised that their mortgage would be paid off with a surpluss.Are you suggesting they are all lying chancers?

I don't know why you take this approach as no-one has posted any such comments. We mention that some are trying it on and you automatically assume that we mean everyone is.

If the fact finds etc had been done then surely the firms would have held on to them as proof that a sale was compliant? Why would they leave themselves open to what is happening now?

They left themselves open to what is happening because they never saw it coming. Totally short sighted.

Finally in your heart of hearts and be honest, what percentage of customers, having had all the risks explained to them, all the charges that they are paying explained to them, and the fact that after 25 years there may not be enough money to pay off the mortgage(let alone a surpluss) and that their might be a whacking great shortfall aswell, how many do you believe would have risked their houses (the biggest single investment in most peoples lives) on a gamble on the stock market.

I would say that 50% is a fair figure. At the end of the day, no-one will know.

Press articles published in the last 2 weeks show that more 25 year endowments will pay a surplus than those that will not. Greed of the consumer is just as great as the greed of the financial services companies. People have a great way of ignoring risk when it comes to making big profits. Just look at all the mortgage buy to lets going on right now. How many of them realise that they could lose their home without too much change in circumstances from events outside of their control?

I put it to you that most endowments had to be miss-sold to be sold!

I doubt it. I think it's fair to say risk was probably understated in the majority of cases but I doubt that most were told it was risk free. Otherwise all mortgages would have been done on endowment basis.

If the complaints/redress situation had been handled better, there would have been none of these problems. For example, if upheld complaints had no redress payable today but a guarantee that the endowment would repay the mortgage on maturity, you would not have the complaints companies getting involved, which would not have had the number of dodgy claims going in which then results in some fo the defensive comments we see.

Whoever thought it was a good idea to look at redress based on a surrender value (rather than current value) and just after a stockmarket crash (which for most endowments early in their life is a good thing, not a bad thing), ought to be shot.

vinno65

dunstonh wrote:

I doubt it. I think it's fair to say risk was probably understated in the majority of cases but I doubt that most were told it was risk free. Otherwise all mortgages would have been done on endowment basis.

If the complaints/redress situation had been handled better, there would have been none of these problems. For example, if upheld complaints had no redress payable today but a guarantee that the endowment would repay the mortgage on maturity, you would not have the complaints companies getting involved, which would not have had the number of dodgy claims going in which then results in some fo the defensive comments we see.

Whoever thought it was a good idea to look at redress based on a surrender value (rather than current value) and just after a stockmarket crash (which for most endowments early in their life is a good thing, not a bad thing), ought to be shot.

Hi Dunston,
Of the 225 upheld complaints on the basis of insufficient evidence to support the sale, how many do you believe were possibly because the documentation never exisited. I know in my own case a fact find was never done and the risks were never explained so the documentation could never have existed yet my complaint was upheld, exactly as you say on the basis that they could not prove the sale compliant. How many other people are in my position i wonder?

You say that the risks must have been explained otherwise all mortgages would have been endowments. At their peak wasn't it running at about 90% endowment versus other methods?

Finally why do you think the firms are paying out now rather than waiting till maturity. Why didn't they offer to pay the mortgage at maturity rather than redress now. Don't tell me it's regulation as I am sure the FSA would have been happy with that solution as would most consumers. You know and I know that that would mean the firms risking their own money rather than that of the consumer, I wonder why they did't take that route?
regards Vinno

dunstonh

Of the 225 upheld complaints on the basis of insufficient evidence to support the sale, how many do you believe were possibly because the documentation never exisited.

You have to remember that these stats are "independent" IFAs only and not tied agents or salesforce IFAs. "Independent" IFAs have tended to be more compliant than salesforces. In the case of many of these, the case files are usually present but things like reason why letters are missing warning paragraphs and other compliance messages. For a large number of those, one of the larger IFA networks managed to mislay hundreds of firms compliance files. This has caused a heated debate as to whom should be liable. The network of the IFA firm that passed the files on.

I know in my own case a fact find was never done and the risks were never explained so the documentation could never have existed yet my complaint was upheld

The bulk of the factfind could be completed from the mortgage application. Indeed, it was only usually the risk question that was the only thing that wasnt on there. I find that experienced advisers do not normally get out a paper document and record information in a regimented form filling style. A lot of the required information is obtained during conversation and noted with missing information obtained later.

Over the years, the standards got better. When you see the early factfinds and compare them over the years, they have got longer and longer and more detailed. Early ones are a joke and some of the risk profiles are pathetic. Often only 3 profiles shown and human nature is that if you present three options, the individual will nearly always pick the middle one. However, I am looking at those from a 2006 perspective now. Back then, this was all new documentation and many didnt see the reason for it.

You say that the risks must have been explained otherwise all mortgages would have been endowments. At their peak wasn't it running at about 90% endowment versus other methods?

This is where it comes down to individuals and perhaps reflects compliance standard of different companies. I believe that the stats of the individual adviser should be taken into account on a complaint. For example, if one adviser has a 90:10 endowment vs repayment ratio then it would suggest that they overstated endowments and pushed them too hard. Equally an adviser with a 10:90 ratio is more likely to have highlighted the risks and that reflects the lower endowment take up. If the balance of probability rule is going to come into play, then it should be used with the advisers own stats.

Finally why do you think the firms are paying out now rather than waiting till maturity. Why didn't they offer to pay the mortgage at maturity rather than redress now. Don't tell me it's regulation as I am sure the FSA would have been happy with that solution as would most consumers. You know and I know that that would mean the firms risking their own money rather than that of the consumer, I wonder why they did't take that route?

The reason is that some of the insurers couldn't afford to run the risk of long term liability. The weakest ones would have gone insolvent. A good with profits fund or medium risk unit linked range on a 25 year endowment should in all probability come in on target (despite interim shortfall warnings). The weak ones are likely to come in a lot worse than is indicated on the current shortfall projecions and they get to pay out a smaller amount now rather than a large amount later. Most of the weaker insurers are in rundown and almost certainly wouldnt have enough income later to pay the liability.