Projected Endowment short falls

Stribz

I had two endowments, 20years and a top up of 16 years, I had projected returns from the Co-Operative Insurance only 3 months before maturity, saying, "5.75% per year was a reasonable assumption", I received no other warning's but the policies both matured well below the 4% bottom limit, I complained to CIS and twice to the Financial Ombudsman Service,(this has taken over a year). FOS say that I did not need to be informed but I thought projection letters were lawful and the idea was to warn people of an shortfall. I have been offered £50 compensation which is a kick in the teeth but more so there is no mention that the CIS should of had a moral obligation to inform policyholder the true position. They advertise that they are "good with money". Has anyone got any advice. Kind regards.

Thrugelmir

You've received annual statements for the policies so why wait until maturity to complain?

Annisele

If CIS ever told you that the 4% projection was a "bottom limit" then you might have cause to complain - but I very much doubt that they did. It's more likely that they said something like "these are not minimum or maximum amounts...you could get back more or less than the amounts shown".

5.75% probably was a reasonable assumption, but reasonable assumptions don't always play out.

You did receive the reprojection letters, and they (almost certainly) would have warned you that the policies weren't guaranteed to meet their target. Even if they didn't, poor performance alone is not a reason to uphold a complaint.

Stribz

When I received the anual projections, my mortgage was going to be paid off, they predicted a conservative 5.75% return, the 4% on the projection would of meant a small difference but only at maturity did I know it was not going to meet the 5.75%, let alone meet the 4%, £900 short fall from predicted amount, This is why I never complained until maturity, sorry I was not very clear.

Annisele

But CIS didn't know what the maturity value would be until maturity either - that's not their fault.

They did tell you that at 4% there would be a small shortfall, and so by implication at less than 4% there would be a larger shortfall. Sorry, but I really can't see that you have a valid complaint against CIS here.

dunstonh

but more so there is no mention that the CIS should of had a moral obligation to inform policyholder the true position

The CIS, along with everyone else, is not in a position to tell you what future returns will be. The most typical projection rates are 4,6 & 8%. Yet over the last year, most endowments performed above 8%. Yet they cant show those figures. They have to show the maximum rates of 4,6 & 8 or lower.

At no point on the illustrated examples does it say that the returns are guaranteed and they do state you can get back more or less than those figures. Over the long term, 5.75% is a reasonable assumption. In the short term it could be anything. That is a limitation of the illustrated examples that they give but they are constrained within FSA guidelines to issue them that way. The FOS wont rule against a company for following FSA rules.

Stribz

I cannot find out when the CIS went below the prediction of 5.75%, at this point, if they were below or even getting close they should of notified the policy holders, when they went below the 4% they should of notified the policy holders, I cannot work out what the policies matured at but it was 3% something, the idea of the annual predication letters which I received, (one as late as March 09, I think as the FSA have still got documents) and policies matured in June 09 is so other arrangements can be met.

Annisele

Stribz wrote: »

I cannot find out when the CIS went below the prediction of 5.75%, at this point, if they were below or even getting close they should of notified the policy holders, when they went below the 4% they should of notified the policy holders.

That just isn't practical.

What sort of time frame do you want that calculation to be over? Do you want CIS to notify you every time its fund makes less than (5.75% / 365) in a single day? Or less than (5.75% / 52) in a week? Or over a year? And when exactly is the year going to start? And who is going to pay for all of these letters?

The best they can do is update policyholders on a fairly regular basis over the terms of their policies - and, at least once they started issuing reprojection letters, that is exactly what they did.

If you'd wanted to keep an eye on your policy more frequently, you could have done so. But endowment policies are designed as long term investments, not things that you decided whether or not to keep depending on what the fund did in the last five minutes.

Dick_here

It's amazing how many people seem to do nothing about their endowment whilst receiving the warning letters, but then want to complain once the policy pays out.

Noselfdiscipline

Please say "should have" instead of "should of". Thanks.

Stribz

I know I have only had a few threads but it is beyond belief how an average man on the street gets a predicted letter of maturity, the insurance company conservatively says what to expect but then does not deliver, then told by the FSA and members on the forum that the insurance company is not at fault and had no moral duty to inform policyholder, others saying why complain after maturity when I thought my mortgage was covered. The person who wants to deliver a grammar lesson needs to get a life, being new to any forum, I feel I am talking to the FSA/insurance company. I was hoping for constructive advice and maybe to see how wide spread the problem is.