Endowment Redress Calculation

magpiecottage

I have put this through my calculator - not Mortgage Fundamentals but I can see how it works.

Using a period from 1 January 1998 to 1 October 2010 (slightly out but close enough) I reckon if you had been on the Halifax Standard Variable rate throughout (and converted £8,275 to repayment on 1 December 2002) I reckon you would now owe £41,032.

By contrast, if it had all been on repayment throughout you would have owed £28,789.

That does mean I am saying I think you now owe more than they think

It also means I think you would have owed rather less than they think.

However, this could be due to fees and charges that I am not aware of. Redress calculations of this nature are also far more open to variation than you might expect because there is an element of educated guesswork.

The surprise, though, is the higher outgoings figure of £1,255 because I reckon you actually saved.

Mortgage Fundamentals rolls up all the actual and all the notional payments with interest and compares them at the date of redress whereas I calculate the difference each month and keep a running total.

I find that if interest rates are below about 7% the endowment is cheaper over a 25 year term (ignoring shortfalls!).

You could try arguing the toss but would have to prove it.

If you used my calculations to do it, they show a loss on the policy of £669, compared to £107.

But I think there is an error in the cost comparison in your favour that outweighs that difference.

PS I do not normally do these for free!

Deal_Surfer

Hi magpiecottage,

First and foremost, many thanks for running my figures through your calculator – I can’t thank you enough! I guess you’ve seen the to-ing and fro-ing with Annisele and decided to share you opinion to help put my mind at rest. Thank you so much and yes, I did see your last sentence…thanks magpiecottage.

I know I should really leave it at that now, but something else is niggling away at my thoughts which I wouldn’t mind getting some clarification on.

In the earlier posts, both Annisele and dunstonh mentioned the ‘possibility’ of challenging the decreasing term assurance life cover.

Annisele wrote: »

If you were single with no dependants then the DTA part of the calculation might be challengable (if so, it might increase your compensation by £1,826.82).

So, if anyone can tell me if I’m in with a chance, I can confirm the following:

At the time of being mis-sold the endowment mortgage, I was single with no dependants i.e. I lived alone and the mortgage was of course in my name only.

At the time of converting part of the endowment mortgage to a repayment (to offset the projected shortfall), I was in a relationship, but still had no dependants and the mortgage continued to be in my name only.

Worth putting this to the policy provider before accepting their offer?

magpiecottage

My last sentence was intended to avoid a rush as I normally do these for IFAs who have complaints upheld.

In theory you could argue that the calculation should not include life cover. However, I think you have still been offered more than I would have come up with.

If you accept then that is the end of it. If you push for more you might get it. I suspect (knowing a little of how Mortgage Fundamentals works) that they will simply change that bit and rerun the calculation.

However, they may decide to rerun it from scratch and come up with a lower figure.

dunstonh

However, they may decide to rerun it from scratch and come up with a lower figure.

Virtually all investment areas are up over the last month. So, that is quite a possibility assuming they used values when there was a dip.

Deal_Surfer

Thanks Magpiecottage…so, it really is a gamble as to whether or not I should pursue it...

Well, I guess I will give it a go, as another £1.8K redress for being mis-sold the policy seems fair to me, especially as I’m potentially facing a further shortfall at the end of the policy (despite the fact I converted part of it a few years ago to try and counter that outcome).

If they do re-run the entire calculation or even just part of it, unless I’m mistaken, they’ll only do that if they agree to making a new offer i.e. to exclude the DTA? If that is the case, even if the figures do come out lower this time (using your figures as a comparative example), in reality, I should still get more than the £1.3K they’re offering me now, as the DTA equates to £1.8K on it’s own?

Oh well, here goes…I’ll try and send them another letter over the next couple of days….

Thanks again everyone. I’m really grateful to those who not only gave up some of their time to read my posts, but also went the extra mile and gave me some really useful feedback!

Deal_Surfer

Sorry, back again….any advice would be gratefully received…

I’ve just received a revised redress offer from my endowment policy provider, on the basis of challenging the decreasing term assurance element of the redress calculations (due to being single and having no dependants at the time of being mis-sold an endowment policy) – see previous posts.

However, all is not well…

Redress Statement (first offer)

‘Assumption’ extract:

The notional decreasing term assurance (Life Cover and Critical Illness Cover) premiums for the purposes of this calculation are £11.94 per month.

Mortgage Fundamentals (first offer)

‘Summary’ extract:

For the Repayment mortgage (B) as shown above, the total payment is £46,690.33 inclusive of Decreasing term assurance premiums totalling £1,826.82.


Redress Statement (second offer)

‘Assumption’ extract:

The notional decreasing term assurance (Critical Illness Cover) premiums for the purposes of this calculation are £10.00 per month.

Mortgage Fundamentals (second offer)

‘Summary’ extract:

For the Repayment mortgage (B) as shown above, the total payment is £46,648.48 inclusive of Critical Illness Cover premiums totalling £1,540.00.

Effectively, challenging the DTA element has reduced the redress offer by £23.83...

I knew the figures would come out different, as a month has passed since the first redress offer, and as mentioned by dunstonh in a previous post, markets have performed well over the last month.

What’s really frustrating though, is the fact the Policy Provider has acknowledged they should deduct the Life Cover element (at an assumed cost of £11.94 per month) but clobbered me with the Critical Illness Cover element (at an assumed cost of £10.00 per month)…ironically meaning I should have just taken the first offer…

Is it time for me just to accept the latest redress offer and walk away or do you really think I’ve got a case if I go back to them yet again, and challenge the Critical Illness Cover element of the redress calculation?

dunstonh, Annisele, Magpiecottage any useful advice or tips?

Deal_Surfer

I take it no-one can shed light on any possible options for me ref. my policy provider including critical illness cover in the recent redress re-calculation? See previous posts...

Deal_Surfer

Third time lucky maybe...can anyone give me any hints or tips ref. the above?

Annisele

I think it comes down to whether you would have taken critical illness cover at £10 a month if you'd taken a repayment mortgage. (I'm guessing £10 was the minimum premium; it's quite a coincidence for it to be such a round figure otherwise).

Obviously very hard to say now what you would have done then if you'd had all the facts!

Is the firm offering replacement CIC for you if you cancel your endowment?

Deal_Surfer

Hi Annisele,

Very grateful for your post – thought I was all alone for a while there…

CIC was discussed (and I’m afraid agreed on my part) at the time of taking out the Endowment Mortgage, although it should be noted it was all done through the very same Financial Advisor who ultimately mis-sold me the endowment policy in the first place.

In the recent ‘revised’ redress calculation, they’ve not offered to replace the CIC in any way shape or form, in fact, it’s only mentioned as detailed in the post above. Funny that, as until I challenged the DTA, it was never even mentioned by the policy holder at all…now all of a sudden because I did challenge the DTA, they’ve raised it and would you believe, ‘assumed’ a £10 premium (from somewhere, not sure where) and compared that to the ‘assumed’ combined Life Assurance and CIC premium of £11.94….a measly £1.94 difference.

Appreciate it’s all getting very complicated, but that’s why I’m getting so frustrated about it.

I could really do with the £1.3K compensation as it stands at the moment – especially being so close to Christmas, but I’m also thinking shall I just refer the whole thing to the FOS and let them come up with a final figure of redress (albeit in several months time when they’ve had the chance to go through the motions with it)…Of course, I also appreciate it could then go either way i.e. I lose out even more or quite rightly get back what I’m entitled to…

Oh well Annisele, I sure the people that have followed this thread are probably reluctant to tell me what I should or shouldn’t do at this stage, but I guess I’m fishing for the answer of….what would you do if you were in my shoes?