Mis-sold mortgage endowment

moneypenny29

I wrote a letter to the company who sold us our endowments, it was Scottish Amicable back in 1998. They agreed that we had been mis-sold our endowment but stated we were not entitiled to any compensation! Can anyone inform me why this would be the case? Unfortunately I ripped the letter up!

turbobob

You can only get compensation if you have suffered a financial loss at the date the calculation was carried out.

This is worked out by comparing the amount of capital you would have paid off a repayment mortgage with your policy's surrender value. Any higher costs you might have paid are also taken into account (although normally endowment mortgages were cheaper than repayment mortgages).

If the surrender value is less than the amount of capital you would have paid off, then you are entitled to compensation for the difference. If the surrender value is more, then you have suffered no financial loss and therefore no compensation.

dunstonh

Following on from turbobob's response....

If you had surrendered the endowment there and then and paid the surrender value into the mortgage and switched to repayment then you would have been financially worse off than had you gone with a repayment mortgage from the start.

If at that point you had been say, £600 worse off then £600 redress would have been paid. You were not worse off but better off.

moneypenny29

Thanks very much for your information. I'm useless at financial matters and I think I am following what you are both saying. However having had a shortfall forecast from, now prudential originally scottish amicable. Do they not take in to consideration that if I had taken out a repayment mortgage for the same term, which I was advised against, at least at the end of the term I would owe nothing where as with the endowment I am going to have to find the shortfall?

dunstonh

However having had a shortfall forecast from, now prudential originally scottish amicable. Do they not take in to consideration that if I had taken out a repayment mortgage for the same term, which I was advised against, at least at the end of the term I would owe nothing where as with the endowment I am going to have to find the shortfall?

No. When they ruled on the complaint originally, they worked out you were not finanancially worse off. If you had taken the endowment at that point and switched to repayment then you would not be in the position you are now. The choice not to do that was yours. You cant complain that you didnt switch to repayment basis when you made the original complaint.

tifo

in 2003/2004 Scottish Amicable paid compensation to many of it's customers (just before they were bought by Prudential) after they were fined by the FSA for mis-selling. I got my policy from them in 1999 and they simply wrote me a letter after the fine asking if i was happy with the products and when i said no, they paid the compensation with interest. So i'm surprised why they didn't write to you also at that time?

EdInvestor

Prudential bought Scottish Amicable in 1997.Part of the demutualisation windfall payment to members was a percentage of their fund value which would be paid to them when their policies matured.

This has nothing to do with misselling or with the way poorly performing markets have affected policy performance.

But it has created some confusion over the likely final outcome of the policies.It has not helped that staff at call centres, and indeed some members themselves do not seem to be aware of this additional payment on top of the normal final policy value, made up of guaranteed plus terminal bonuses.

Froggitt

EdInvestor wrote: »

Prudential bought Scottish Amicable in 1997.Part of the demutualisation windfall payment to members was a percentage of their fund value which would be paid to them when their policies matured.

This has nothing to do with misselling or with the way poorly performing markets have affected policy performance.

But it has created some confusion over the likely final outcome of the policies.It has not helped that staff at call centres, and indeed some members themselves do not seem to be aware of this additional payment on top of the normal final policy value, made up of guaranteed plus terminal bonuses.

Im not sure I knew about that Ed.....or Id forgotten in the intervening decade or so. Thanks for the info....only a couple of years left so even though the shortfall increases every year :mad::mad: despite the stockmarket going up 50%, it looks like its better to hang on.

What sort of levels are the additional payments? x% of fund value?

dunstonh

only a couple of years left so even though the shortfall increases every year :mad::mad: despite the stockmarket going up 50%, it looks like its better to hang on.

Most Scot Am policies were on target prior to the recession. They were running with an over 90% success rate on hitting target and even those that did end up short were doing so with less than £1000.

The recession would have hit it obviously but we are still well down on the high point and remember that the stockmarkets only account for some of the investment fund.

Froggitt

Sure. Two years of 1% bonuses instead of 6% bonuses = a 10% reduction in payout. Is there anywhere that compares annual bonuses over the years across companies......or shows what the ScotAm bonuses have been?

Presumably every 25 year ScotAm policy maturing now is in the red, and likely to remain so going forward?

dunstonh

Sure. Two years of 1% bonuses instead of 6% bonuses = a 10% reduction in payout. Is there anywhere that compares annual bonuses over the years across companies......or shows what the ScotAm bonuses have been?

It's not really worth comparing as so many life companies have closed their doors and ceased investing for returns but focused on solvency. Scot Am policies though would be near the top end. Not as good as Pru who had never failed until recently. Scpt Am for example did say that 2007 had a near 100% success rate on hitting target. So, as long as the recovery is sustained, the policies could bounce back.