Legal and General admit misselling but offer less than our premiums

michaelm

My wife and I took out an endowment with L&G in 1988, the year before we married. At the time we were advised of all the benefits, mortgage paid off, cash payment etc, but none of the pitfalls. The agent later went on to leave the company and we received a letter from L&G soon after advising us not to have any further dealings with the agent as they were taking legal action against them.

Fast forward to October 1997. A new agent came on the scene and started filling our heads full of stories that our endowment was not the best one for us, that he had a better policy for us with a higher projected return etc, advised us to cash in our existing policies and put the entire surrender value into the new one. He played on the fact our second child had just been born and the security of the kids etc. So we decided to go with this.

The first problem arose when the surrender value quoted by this agent turned out to be over inflated by around £900. When we pulled the agent up about this, saying we wanted the rest of our money, he started saying that it was almost Christmas and he would be giving us the money out of his own pocket, he wouldn't be able to afford Christmas presents for his kids etc. The usual rubbish. We persisted anyway and got the rest of our money.

We put the entire surrender value, about £4000, into this new policy and went about our normal lives. Until they collapsed 3 years ago.

That was when the letter from L&G arrived saying we had a projected shortfall of over £15,000 on our mortgage repayment. We were gutted. It turned out that the new policy we had taken out was an isa and serious illness and life cover. There is no way on earth I would have knowingly have switched my endowment to an isa and complained to L&G that we had been mis-sold. They investigated and in May 2004 agreed that we had been mis-sold. However, the agent had since left the company and had started his own mortgage advice company. All the while we continued, and have continued, to pay our premiums

We were offered £5,000 to cash the policies in. This was to include the £4,000 we originally paid into the isa plus ALL premiums paid in the following 7 years. We refused the offer and it was revised to £8,000 as this is what they estimated the capital we would have repaid on our mortgage to have been during the period 1989-2004 to have been. So on a £33,500 mortgage over 25 years we would have repaid £8000 capital in 15 of those years. Again we declined and we were advised by L&G not to cash the policy in and continue to pay our premiums until they fully investigated the matter.

We heard nothing from L&G until yesterday when we got a letter from them saying that as 6 months had expired since the original offer was made we had no recourse to the Ombudsman and that we had 14 days to accept the original offer or it would be taken off the table. No mention was made of the Ombudsman, timescales etc in either the original or revised offers.

We reckon that we have made premiums totalling around £14,000 in the last 18 years and that this is the very least L&G should offer and we would accept this just to be rid of them. It would also mean us taking switching to a capital + interest mortgage on the balance for the remainder of our loan term (8 years).

I have calculated that on our £33,500 mortgage, we would have repaid £23,200 in capital to date. Is it reasonable to expect L&G to come up with a figure around this mark as compensation?

EdInvestor

Again we declined and we were advised by L&G not to cash the policy in and continue to pay our premiums until they fully investigated the matter.

There appears to be a misunderstanding here.When you refused their offer, you should have referred the complaint to the Ombudsman.You may like to call his office for some advice now.

https://www.financial-ombudsman.org.uk

However the compensation money is designed to put you in the same position you would be in if you had taken out a repayment mortgage. It is calculated according to a set formula and has nothing to do with the size of the shortfall or the premiums paid.

It is based on you cashing in the policy, and using the proceeds and the redress money to reduce the capital owed, then remortgaging to repayment and increasing the monthly payment by the amount paid into the endowment (or ISA).

It is likely that the Ombudsman will advise you to accept the offer - it is highly unlikely it will be increased.But because your case is a bit unusual, I suggest you call him up to check.

Then I would suggest you go see a mortgage broker to sort you out with a new smaller ordinary repayment mortgage.

dunstonh

With a recovering stockmarket any recalculation you get done could see the redress paid lowered so do be wary in your requests. Make sure you dont ask something that results in a lower figure.