Report Endowment Misselling Compensation SUCCESSES

mayb_2

Well 5 stars to legal and general and to you too for that result.

ncb_2

My wife took out an endowment in 1996 with her twin (we were not married then!). She has had an amber letter but no red one, so I think has not been time barred from compaining?

She is a very risk averse person and was a first time buyer then. She was sold an endowment on the basis it was fleixble according to the cover letter from the adviser. It was attached to a mortgage, but she did not expect to have that mortgage long term. She now needs to cash the endowment in but discovers that it is not a good idea, i.e. the policy does not deliver the flexible future suggested. Is this a mis-selling ground for complaint?

There is no mention in the written advice to risk and she does not recall any discussion of this.

The endowment is a low cost homebuyer one from Axa Equity and Law.

Not sure if I should start a new thread for this? If so guidance as to where would be much appreciated.

mayb_2

nch a missale occurs when you have bought an endowment and you did not understand the element of risk involved in the product sold to you. If your wife is very risk adverse it is unlikely she would have knowingly bought such a product. If no red letter has arrived I assume it is because they believe it is now roughly in line to pay off the amount required for the original mortgage. Nobody is getting redress for lost profits I'm afraid. If your wife has a document stating the return she would get - ie a statement that a certain amount would be paid at term, then she will get that amount from the company as it would be part of the contract between them. If on the other hand this is not the case and it was decided to be a missale, she would be redressed by the company puting her back into the position she would have been in if she had had a repayment mortgage at the outset.

It may be a good idea to ask for a final projection figure and seek advice before taking action. However, I believe the low cost homebuyer loans in general, were the least likely to produce the required result, particularly those taken out in the later years.

ncb_2

Thanks for the info.

I had thought in laymans terms that a mis-sale was where you were sold an inappropriate product for your needs. She wanted flexibility, and is now stuck paying into it for years or take a massive hit.

On the issue of shortfall, it is projected to be between 8K surplus (8%) or 20K deficit, hence the amber letter. the 6% projection has a deficit, I do not recall the amount but think it was about 6K.

I did notice on the annual statements they went from saying

Provided investment and other conditions are sufficiently favourable, the actual maturity value will exceed the required amount therefore producing an excess cash sum (my emphasis)

to

Provided investment and other conditions are sufficiently favourable, the actual maturity value could exceed the required amount therefore producing an excess cash sum

within a year of the policy start date. Certainly my wife says she thought at the time that the only question was how big the excess would be!

dunstonh

I had thought in laymans terms that a mis-sale was where you were sold an inappropriate product for your needs. She wanted flexibility, and is now stuck paying into it for years or take a massive hit.

Mortgages were not exactly known for their flexibility back in 1996. Remortgaging between lenders was uncommon and had only just started. The flexibility with the endowment would relate to frequent home movers and later in the mortgage term when the surrender penalty finishes.

Many of the AXA endowments are unit linked which is why its probably on track for a surplus and (if 25 years or more) would be expected to hit a surplus position as they tended to need only a 7% target growth rate which is within potential of the usual funds used on AXA endowments.

If you complain and get the policy voided then its quite probable that there will be no gain because of its current position of being on track. Unless it is documented that the mortgage was likely to be repaid in the short term then there is no reason for the adviser (or anyone reviewing the complaint) to believe your wife had any intention of repaying the mortgage early unless she has proof to the contrary.

mayb_2

Didn't we all ncb. You are right you were sold an inappropriate product if you needed the security of knowing your mortgage would be paid. Not sure how the flexibility bit comes in except you can maintain an endowment even if you move the mortgage. The change of wording may help you, but on the other hand the initial and changed sentences both refer to investment conditions so covering themselves anyway. The FSA wrote a report some years ago stating that many low cost endowments were sold in later years despite the fact they had little chance of succeeding in their stated aims. The change in wording would indicate they were aware of that That to me would indicate they were all missold but hey who am I? If you look into this, and could afford it may be worth maintaining the policy - depending on the projection for it, and just ensuring that your mortgage is a repayment one. Otherwise go for the misselling claim now and get that underway - it can take years if it is contested.

ncb_2

Hi,

The flexibility point is that she no longer has the mortgage, moving into my house when she married me - but she is stuck having the endowment policy and payments. My mortgage is a long fixed deal so we cannot easily move or change that to part endowment...and would prefer not to anyway as I want it paid off at term!

I am not really minded to complain, but if we end up having to cash it in for short term cash flow I know she loses out big time....this is what made me think the flexibility bit did not seem to sit with a policy that cannot be ended early without huge loss, i.e. not the appropriate product.

If she does not get a red letter can I assume that there is no time bar (other than 15 years? which takes to 2011) so if we are forced by circumstance to cash it in we can then make our complaint then I will probably just sit and wait for a bit and see how it goes.

If we get to 15 years I guess we have to complain then, as if it is missold (big if there I know) we have to by that deadline or become barred. That is harsh, as at that time it may be on track but in the remaining decade may run into trouble - and then any potential missale becomes finacially worth pursuing. I mean who would bother if they just say whoops, but hey your products doing OK so no loss....Or should she cash in and seek compensation for the losses incurred by doing so? Much to consider.

Thanks for all the advice, have to discuss with wife....may just get the complaint going as you say it can take ages, and see what occurs.

dunstonh

My mortgage is a long fixed deal so we cannot easily move or change that to part endowment...and would prefer not to anyway as I want it paid off at term!

The deal tie in has no impact on switching between interest only and repayment. The endowment is on track for surplus so even if you dont convert the full amount, its still worth it.

this is what made me think the flexibility bit did not seem to sit with a policy that cannot be ended early without huge loss, i.e. not the appropriate product.

If there is evidence then you can complain. However, without evidence it will mean nothing. At what point does the surrender penalty end?

ncb_2

If you mean the penalty on the endowment then good question, I am getting to the edge of my knowledge. I had just been working on the assumption that it generally makes bad sense to cash an endowment early....I will check the documents. If we can cash it in without it being a long term finacial disaster then I am happy as problem solved.

The tie in on the mortgage ends in 2 years (2010) so before the 15 years on the endowment. Even if I got out of it, I could not match the rate at present. It is the current bit fuel/food hikes and the fact my wife is now on lowly paid maternity leave (coupled with the cost of a baby) that makes the £75 per month on the endowment an outgoing we can not really afford at present. To keep this up I may have to reduce my pension payments, and that feels like a bad idea cos tax on them is very favourable.

To give an idea of my wifes financial ineptness, when we married I went through her disorganised docs and we claimed back about 4.5K of overpaid tax from the 6 previous years (on pension payments!). I am not the least surprised that when taking her mortgage she did not have a clue what she was doing, just did what the adviser told her to do to allow the house to be purchased.

mayb_2

Well ncb in those days it wasn' expected that the average person understood the stock market. Things have changed drastically since then and a lot more information is available.

It may be worth you remortgaging for a longer term to give affordable repayments - you can always shrink this again. You have to take into account the bad market out there right now but there are a couple of places offering reasonable deals still apparently. You really have to look at the set up cost of those however, if money is tight - you may be able to have the costs added to the new mortgage. I sympathise with your position as my son had his first baby in December and his wife went back to work last week. They couldn't afford her not to.

One option that presents itself is to cash in the endowment and pay that off the mortgage for now. Then keep the mortgage itself running as interest only, as it is now. It is now the buyer's responsibility to address the issue of covering the cost at the end of the morgage term on an interest free package. Nobody asks how you intend to do that anymore. If you have spare cash you can put it into an ISA towards the mortgage payoff for now ,but you will still be able to get at it if you need to. In a few years' time when things are better on the home finances and hopefully the mortgage market side you can look at this again.

I hope it works out for you and your family ncb. If you can afford the wait you may get more from a claim, it is your call really - no point in getting into debt or reducing your pension in the meantime though.