MisManagement of my Endowment

fokkerprop

Hi Martin, I bought an endowment policy in 1986 for my mortgage. It should've matured at £18,500 in 2011 and I was advised that I could expect as much as £30,000. In reality I will be lucky to get £12,000. I claimed for mis-selling and got about £2000 compensation a couple of years ago. You will see from below how the bonuses have been added.


Year|bonus
1987 | £273.35
1988 | £280.49
1989 | £280.49
1990 | £317.81
1991 | £347.20
1992 | £341.94
1993 | £361.15
1994 | £345.48
1995 | £319.87
1996 | £338.26
1997 | £357.71
1998 | £263.55
1999 | £250.24
2000 | £260.25
2001 | £135.33
2002 | £52.25
2003 | £26.26
2004 | £26.32
2005 | £26.39
2006 | £26.45
2007 | £26.52
2008 | £26.59

You will see that after 2000 the bonus drops off dramatically. My question is that how do these companies decided how much bonus to pay. I am concerned that my policy has not only been mis-sold but also mis-managed.

In this time of greedy bankers it appears that they have been more concerned with paying themselves bonuses and keeping profits for themselves that they have failed to live up to the obligation to the endowment holders. The time between 2000 and now have been very good "boom" years with high profits in many financial institutes, so how can the bonus paid be far worse than in the previous years when we had at least 2 recessions.

Is there a procedure to follow to get this investigated?

dunstonh

It should've matured at £18,500 in 2011 and I was advised that I could expect as much as £30,000

Not an unreasonable expectation. Policies maturing in the 80s often paid out 3 or 4 times their target amount. It was the events then that brought in the compliance phrase that past performance is no indication of future returns.

You will see that after 2000 the bonus drops off dramatically. My question is that how do these companies decided how much bonus to pay.

Based on the underlying assets of the investment funds.

I am concerned that my policy has not only been mis-sold but also mis-managed.

2001 you say the dot.com crash which saw the biggest stockmarket drops for decades. Just as things were starting to recover to the pre dot.com crash along came the credit crunch and global recession. You may have heard about these on the news.

In this time of greedy bankers it appears that they have been more concerned with paying themselves bonuses and keeping profits for themselves that they have failed to live up to the obligation to the endowment holders.

What have bankers got to do with the investment returns?

The time between 2000 and now have been very good "boom" years with high profits in many financial institutes, so how can the bonus paid be far worse than in the previous years when we had at least 2 recessions.

I suggest you look at stockmarket performance in those periods. It has been one of the worst 10 year periods in history.

Is there a procedure to follow to get this investigated?

No. You cannot complain about investment returns and there has been no wrong doing.

turbobob

fokkerprop wrote: »

I claimed for mis-selling and got about £2000 compensation a couple of years ago.

When your complaint was upheld, if you'd accepted the compensation and surrendered the policy, paid that amount off your mortgage and converted the rest to repayment, you'd be in the same position as if you'd taken out a repayment mortgage instead. I.e. the position you'd be in if the endowment had not been mis-sold to you. That was the aim of paying compensation in endowment complaint cases.

It's reasonable to assume that as you'd complained about mis-selling and had the complaint upheld, you were at that point aware of the risks of endowment policies and chose to keep it running aware there were no guarantees it would achieve the target.

You will see from below how the bonuses have been added.


Year|bonus
1987 | £273.35
1988 | £280.49
1989 | £280.49
1990 | £317.81
1991 | £347.20
1992 | £341.94
1993 | £361.15
1994 | £345.48
1995 | £319.87
1996 | £338.26
1997 | £357.71
1998 | £263.55
1999 | £250.24
2000 | £260.25
2001 | £135.33
2002 | £52.25
2003 | £26.26
2004 | £26.32
2005 | £26.39
2006 | £26.45
2007 | £26.52
2008 | £26.59

You will see that after 2000 the bonus drops off dramatically. My question is that how do these companies decided how much bonus to pay. I am concerned that my policy has not only been mis-sold but also mis-managed.

There have been poor stockmarket returns since 2000 as already mentioned. As of the end of March 2010, the FTSE All Share Index total return for the last 10 years was 2.6% p.a. (this includes dividends, if you exclude dividends the return was negative). When endowments were sold they had an assumption of higher average growth rates than this.

Bonuses will take account of things like investment returns achieved throughout the term of the policy, the amount of benefits already guaranteed (that is any basic guaranteed sum assured, plus any bonuses already added), and assumptions for future investment growth.

There are other factors. Equitable Life added high rates of bonuses through the 80's and 90's which was great when the markets were doing well. Unfortunately, when the markets turned, they found they couldn't afford the bonuses they'd guaranteed and it all collapsed. I believe rules on solvency for insurance companies were changed following this. This has essentially meant that life funds now have to hold more 'safe' assets (like treasury bonds) to cover their liabilities, and this means that they can hold fewer risky assets (shares, property etc.) which has had an impact on growth rates.