Winterthur Life Endowment Policy Concerns

Deal_Surfer

Any advice would be gratefully received…but only read on if you’ve got the time to do so, as it’s a long old post.:eek:

I took out an endowment policy with Winterthur Life in Dec. 1997, along with an interest only mortgage (via Halifax) of £42, 275 – hence the endowment plan, which I was ‘convinced’ would be a good idea as opposed to a capital and interest mortgage...

Whilst looking for a small first time one bed property to purchase (a couple of months prior to the above), a local Estate Agent’s ‘Financial Advisor’ provided me with his calculations on the endowment policy and mortgage (albeit hand scribbled graphs and notes on several pieces of plain paper, of which the ‘final figures discussed’ were put in writing by the same Financial Advisor on company headed paper). His projections for the endowment policy were based on an ‘assumed’ unit price growth rate of 6.75% (when calculating my monthly premium of £72.48) to reach a target amount of £41, 956 (100% Unit Fund – mixed)…

When I found a suitable property and the purchase process began, formal ‘acceptance’ terms came through from Winterthur Life, but the projections had changed to the following (monthly premium now £74.14):

Growth at 5% per year, might be worth £30,700
Growth at 7.5% per year, might be worth £43,000
Growth at 10% per year, might be worth £60,500

(Target Amount £42,921)

In hindsight, being naïve about the commitment I was entering into, I continued with the mortgage and endowment policy…

In Nov. 2000, I was sent my first up-date on my endowment plan:

Growth at 4% per year, might be worth £26,800 (Potential Shortfall of £16,121)
Growth at 6% per year, might be worth £34,900 (Potential Shortfall of £8,021)
Growth at 8% per year, might be worth £45,800 (Potential Surplus of £2,879)

In Nov. 2002, I was sent a further up-date:

Growth at 4% per year, might be worth £25,900 (Potential Shortfall of £17,021)
Growth at 6% per year, might be worth £33,400 (Potential Shortfall of £9,521)
Growth at 8% per year, might be worth £43,300 (Potential Surplus of £379)

In Nov. 2003, I was sent a further up-date:

Growth at 4% per year, might be worth £26,200 (Potential Shortfall of £16,721)
Growth at 6% per year, might be worth £33,700 (Potential Shortfall of £9,221)
Growth at 8% per year, might be worth £43,700 (Potential Surplus of £779)

In Nov. 2005, I was sent a further up-date with an ‘Amber Alert: Significant Risk of a Shortfall’:

Growth at 4% per year, might be worth £27,700 (Potential Shortfall of £15,221)
Growth at 6% per year, might be worth £35,400 (Potential Shortfall of £7,521)
Growth at 8% per year, might be worth £45,400 (Potential Surplus of £2,479)

In Nov. 2007, I was sent a further up-date with an ‘Amber Alert: Significant Risk of a Shortfall’:

Growth at 4% per year, might be worth £28,500 (Potential Shortfall of £14,421)
Growth at 6% per year, might be worth £35,800 (Potential Shortfall of £7,121)
Growth at 8% per year, might be worth £45,100 (Potential Surplus of £2,179)

In Nov. 2009, I was sent a further up-date with a ‘Red Alert: High Risk of a Shortfall’:

Growth at 4% per year, might be worth £27,500 (Potential Shortfall of £15,421)
Growth at 6% per year, might be worth £33,800 (Potential Shortfall of £9,121)
Growth at 8% per year, might be worth £41,500 (Potential Shortfall of £1,421)


During the term of the above endowment policy, I ended up moving to a slightly bigger property in Nov. 2002 anyway. Due to the progress of the endowment policy, I decided to try and make provisions to safe guard the future. Effectively, I took out a new 25-year mortgage on the next property with a different lender (paying of the previous Halifax mortgage in the process), but this time, opting for a split Interest Only and Capital & Interest Mortgage. As the 6% assumed growth figure of the endowment policy seemed like a middle ground and ‘hopefully’ a realistic projection at the time, the interest only portion of the new mortgage was based on exactly £34,000 to try and offset the projected shortfall…

According to the latest ‘Red Alert’ statement sent in Nov. last year, I’m still on track to get the £34K ish amount, but some way off the original target amount (at the time of taking out the policy) of £43K ish.

I’m pondering with the idea of writing to the original Financial Advisor who sold me the policy (or though it looks like they’ve moved premises, but still ‘appear’ to be trading using the same company name), as I believe I might have a case of being miss-sold an endowment policy. According to the Nov. 2009 statement, I have until the 30th Nov. 2012 to make a complaint.

Apologies for the length of this post, but before I prepare such a letter (MSE’s website has suggested using the templates from Which?), I’m trying to get my head round some of the concerns I have, so I’d like to ask the experts out there the following:

1. Should I write to the original Financial Advisor first (although I’m not 100% sure they’re the same organisation, as they have no website, and I don’t know if they’re still ‘Representative’s only of Winterthur Life’, as stated in the small print at the bottom of their original letters in 1997/98)?

2. Pending the answer of the above, would it just be easier to complain directly to Winterthur Life, as the Nov. 2009 statement includes the wording ‘If we do not receive your complaint by the 30th November 2012’ ?

3. As I changed mortgage level (and lender) part way through the endowment policy, and reduced the Interest Only portion from the original £43K ish to £34K (to try and offset the projected shortfall), will this go against me in any valid complaint I might have?

4. The endowment policy is due to mature in January 2023, but my current mortgage isn’t due to be paid off in June 2027 (due to moving premises and taking out a new mortgage), will this go against me in any valid complaint I might have?

5. On face value, will any compensation that may be due (pending a successful complaint), be minimal i.e. not worth the hassle of pursuing, based on any of the facts and figures given above (if that can even be seen from the information given so far)?

6. Probably the most important concern I have – pending any valid complaint (either via the policy provider or even the Financial Ombudsman Service if it goes that far) and any compensation being paid due to a financial loss, will I be forced to surrender or sell my endowment policy?

7. Pending any successful complaint or not, would it make sense to surrender or sell my endowment policy anyway (based on it’s current progress), with a view to switching to a full repayment mortgage or investing in another repayment vehicle such as an ISA?

8. Pending any successful complaint or not, would it make sense to leave the policy as it is, just to see what happens by the time it matures in 2023, as effectively, I have a ‘buffer’ time of over 4-years i.e. in 2023, pending it’s progress, I could extend the term with the policy provider or reinvest the total amount recievd into a savings plan until 2027?

As I’m sure you can tell from above, despite all of the research I’ve been trying to do for myself on the Internet, I don’t feel that I have a particularly straightforward case. I also appreciate that I may be looking for answers to questions that I may simply never get…

Thanks in advance to any feedback that’s given anyway.:)

Chinkle

What you haven't explained in your very long post, is why you think you were mis-sold.

You bought an endowment based on various projections of growth, like most policies bought at this time they haven't kept up with this and the companies as required by FSA have sent warning letters and advised people of that there may be shortfalls and they should prepare themselves financially for this.

You already began this process when you switched to part repayment/part endowment. Just keep reviewing this.

dunstonh

This endowment may actually still hit target. Given the value in November last year and the events of the last few years coupled with it being invested in a balanced managed fund where the 8% projection figure is not unrealistic. (especially post crash)

Like chinkle says, you havent said why you think it was mis-sold. Given you would still consider investing in an ISA as a potential alterantive, it does suggest you have the risk profile and acceptance of investment risk. A potential shortfall is not grounds for complaint.

Deal_Surfer

Thanks for taking the time to read my post Chinkle and dunstonh.

Ref. your comments about me not explaining why I was mis-sold a policy, in your opinions, is there not a discrepancy between the Financial Advisors projects of an ‘assumed’ unit price growth rate of 6.75% to reach a target amount of £41, 956 and Winterthur Life’s ‘Letter of Acceptance’ projections of 7.5% to reach £43,000. I know there’s only £1K ish in it, but a 0.75% difference (which isn’t in my favour) surely leads someone to believe the risks are lower when discussing projections? Like I said, he even put his figures in writing, which contradicted the offer from the policy provider a few weeks later – at least one reason to claim being mis-sold a policy surely i.e. he made the risks appear lower than they actually were???

Depending on what the future might bring and any decisions I make about pursuing it further, do you have any knowledge ref. Question No. 6 in my original post?

Annisele

Regarding your question six:

Deal_Surfer wrote: »

6. Probably the most important concern I have – pending any valid complaint (either via the policy provider or even the Financial Ombudsman Service if it goes that far) and any compensation being paid due to a financial loss, will I be forced to surrender or sell my endowment policy?

No - you wouldn't be made to surrender the policy. The Financial Ombudsman Service publishes a factsheet, which explains that you can keep the endowment - but you do so knowing the risks.

However, as others have pointed out, you've said nothing that suggests the policy was mis-sold in the first place.

Deal_Surfer

Thanks Annisele for answering Question 6.

Not sure if you have yet seen my post from a few minutes ago ref. the projection percentage ‘discrepancy’ concern…

Annisele

Yes, I saw your post about the changed projections - but the "scribbles" from the adviser were based on a different premium to the one you ended up paying, and it sounds as though you did receive projections from the insurer based on your actual premium.

(A possible explanation is that your life might have been 'rated' - in other words, once the insurer looked at your medical history it decided that it wanted to charge you slightly more than normal for the life insurance. That would explain a slight premium increase, and lower projections than the "scribbles").

Deal_Surfer

Hello Annisele – In addition to the Question 6 scenario, I forgot to say why I was concerned - Which? suggests (in some cases) companies can make you surrender the policy:

http://www.which.co.uk/advice/mis-sold-endowments-how-to-claim/after-youve-made-your-complaint/index.jsp

Once you’ve been compensated

Some people choose to surrender their policy when they've been compensated and, in some cases, companies can make you surrender your policy along with paying compensation.

Personally, I’ll take more notice of the FOS factsheet you kindly linked!

Hhmmm, ref. the premium change/projection discrepancy, I'll see if I can shed further light on it from my original paperwork.

magpiecottage

You can normally make a complaint on an endowment up to a date which the provider specifies in writing, which must be not less than three years after the first "red" letter and not less than six months after the letter specifying the cut off date.

However, by 1997 most advisers were careful to document that repayment mortgages had also been discussed and there were clear warnings that the policy might not pay enough.

As a result, most complaints about sales that late are thrown out. It is very seldom possible to demonstrate that an endowment mortgage was inherently wrong.

There are other grounds on which they can be upheld - the actual fund invested in being too high a risk, the term being wrong, even (believe it or not) the wrong person being insured.

If you do complain, you need to find out who to. It is possible that the firm was a representative of Winterthur who will then have to answer it.

If not, you may find that the estate agency is a partnership. If so, liability rests jointly and severally with all the partners at the time (i.e you can pursue any one of them for your entire claim) - but anybody who joined since then would not be. Thus if all the partners there in 1997 have retired nobody there now would be liable but if one person who was a partner is still there you could complain to them even if they did not personally advise you.

So you may need to do some tracking.

dunstonh

Ref. your comments about me not explaining why I was mis-sold a policy, in your opinions, is there not a discrepancy between the Financial Advisors projects of an ‘assumed’ unit price growth rate of 6.75% to reach a target amount of £41, 956 and Winterthur Life’s ‘Letter of Acceptance’ projections of 7.5% to reach £43,000.

No. most endowments could be set up with a target growth rate in mind and premiums set to that level. I never did many but I recall setting the ones i did to a target growth rate of 4.4%. The target growth rate and the FSA projection rates (or PIA set depending on date) were two different things. The premium you paid was affected by the target growth rate. The lower the target rate, the higher the monthly premium (and vice versa).

Like I said, he even put his figures in writing, which contradicted the offer from the policy provider a few weeks later – at least one reason to claim being mis-sold a policy surely i.e. he made the risks appear lower than they actually were???

It could easily be argued that what you were given in scribbles indacated one target growth rate example and was not the one you went with. During the concepts and ideas stage where you talk about the possible options, the information will not be cast in stone. So, its is not uncommon to see earlier information change. The illustration is where it gets firmed up. Now, if he has said words like guarantee in the scribbles then its a different matter. The provider may also rate the premiums depending on underwriting so even then it is still open to change.

Which? suggests (in some cases) companies can make you surrender the policy:

In some cases they can if the policy is to be voided. i.e. a pre-sale endowment is often voided. However, in complaints about repayment vs endowment then you would not expect that. I'm not a big fan of Which? They re-write their history when they are wrong. They used to recommend endowments, yet you wouldnt believe that now. Ironically, if you followed Which? advice, you would have no consumer protection to complain as their method removed consumer protection.

Deal_Surfer

Hello dunstonh – many thanks for your additional feedback.

Ref. Which? It begs the question of suitability ref. their letter templates when making a complaint about endowment mis-selling i.e MSE recommends them, even providing a link….I’m getting the impression that you wouldn’t go down the Which? letter template route if you were in my shoes???