Endownment compensation offered - please help!

susanmc

Hi I hope someone will be able to help me.

My mum was sold an endownment mortgage to buy her council flat in 1997. The policy was for 10 years and £15000. She has since sold that flat and taken a new mortgage for £10000 but still has the policy for £15000. She received the shortfall letter (£1800 shortfall) and we did a letter to the company (Pearl Assurance) using the which website.

The reason the complaint was upheld was that the policy was due to continue into her retirement. They didn't agree that she wasn't informed about the possible shortfall. I'm wondering if this was in the small print somewhere. It certainly wasn't discussed at all with the mortgage adviser.

She has today received a letter saying that the surrender value on the policy is £9400 and she has 3 options.

She can continue with the policy and there is a Pearl Promise attached to it (although I'm sure it doesn't make up anything near the shortfall).

She can continue with the policy and the Pearl Promise will be removed and a compensation payment of £2800 will be made.

She can surrender the policy for £12200 (although this is paid in two instalments).

She is thinking of surrendering it as she only has to add £600 to pay off her mortgage if she only gets the £9400 right away and this will save her £170 a month (she has 2 years left to run).

I've heard somewhere before about two payments being made. Can someone please explain when payments are usually made - is the compensation paid at the end of term when the policy should have matured? Any advice on which option would be greatly appreciated.