Mis-sold Endowment Policy, Another Approach?

justcallmemug

Hi all, as the username suggests, i feel like i've been well and truly stitched up! i purchased an endowment policy in may 1997 to cover £60,389 with the then commercial union. my boyfriend and i were 'advised' to take out an endowment rather than a repayment because you'd have a lovely lump sum to do with as you wished when it matures. sounds familiar?? now showing a considerable shortfall and after receiving amber letters we approached the financial advisers concerned who didn't want to know so we contacted fsa. we've just received a letter telling us that unless we provide hard evidence that we were misled then they cannot uphold the complaint as our attitude to risk was 'balanced'. is there any other approach we can take now? thanks

dunstonh

now showing a considerable shortfall

Even the best endowment taken out in 1997 on track for surplus would still so a shortfall on the projection letters. You cannot rely on that as a sole
source of information to see how good/bad an endowment is. Even the endowments maturing this year with a surplus received shortfall letters the time before maturity.

and after receiving amber letters we approached the financial advisers concerned who didn't want to know so we contacted fsa

If the company turn you down, they give you the option to refer the case to the ombudsman. Going to the FSA will not do you any good at all because the FSA doesnt review complaints on an individual basis.

we've just received a letter telling us that unless we provide hard evidence that we were misled then they cannot uphold the complaint as our attitude to risk was 'balanced'. is there any other approach we can take now?

By 1997 things had improved on the documentation front as well as projections. I seem to recall at that stage the revised figures of 4, 6 & 8% were in effect on illustrations and 4% would clearly show a shortfall position. You would expect a 1997 case to also carry more warnings and have better documentation than say a 1989 case.

None of us here can inspect the documents but if the records show you as medium risk (as balanced indicates) and there are warnings in the suitability letter that it is not guaranteed to repay the mortgage and there is the possibility of it falling short, then evidence works against you.

EdInvestor

If the advisor has turned down your complaint you can take it to the Ombudsman (FOS - not the FSA, which is the regulator) but you must do it within 6 months.Is this letter from the FOS?

You cannot claim just because you may have made a loss, you need to show how it was unsuitable for you, usually because it was inappropriate for your attitude to risk. eg Perhaps you weren't told the money would be invested in the stockmarket?

justcallmemug

Hi, Thanks for reply. i got a bit confused, the rejection letter was from the fos not the fsa. they said that the endowment policy was suitable for all except risk adverse indeviduals. we weren't told the payments would be linked to the stock market but as usual there is no evidence of this just our word against theirs. we were also led to believe the repayment option was more expensive than endowment but i guess they didn't get as much commision for selling that did they! the growth projections we recieved were 5%, 7.5%, 8% and 10%. only the 8% projection would actually make enough to repay the borrowed amount.

dunstonh

we were also led to believe the repayment option was more expensive than endowment

More often than not, that is correct and in reality that was the most common reason people went with endowments.

If you mentioned that in your complaint, then that could easily have been used as evidence against you as it confirms that repayment mortgages were discussed and compared.

Crazy_Saver

Even the best endowment taken out in 1997 on track for surplus would still so a shortfall on the projection letters. You cannot rely on that as a sole
source of information to see how good/bad an endowment is. Even the endowments maturing this year with a surplus received shortfall letters the time before maturity.

Hi everyone.

I often see replies like this and it has given me some hope regarding my endowment policy.

Taken out in '91 to cover £60k mortgage.

In 2000 we received our first worrying statement saying possible shortfall of £20k, so we transferred £20k over to a repayment mortgage leaving £40k on endowment

Over the years, projected shortfall has been getting larger and larger.

This July received first Red Alert letter showing £31k shortfall.

As most of you know, we are in the process of a claim but is there just a slight chance that the endowment may recover and reach our target amount!

dunstonh

Over the years, projected shortfall has been getting larger and larger.

Over the years, the projection rates used on for the projections have changed. Usually downward. Some are beginning to use higher projection rates again as their endowments recover.

but is there just a slight chance that the endowment may recover and reach our target amount!

An Endowment is just a tax wrapper. It doesnt make or lose money. Its the investments contained within that do. Most 25 (or more) year endowments invested in unit linked stockmarket funds (ideally a spread) should hit target if they have a target growth rate of 7.5%p.a. or less. Of course, its a crystall ball guess but its a good judgement guess. The stronger with profit endowments (Pru and NU mainly) of 25 years or more should come in on target. NU have some with some silly target growth rates though so unlike Pru where you do expect to hit surplus, NU doesnt have that sort of expection. You would need to look at each one individually.

So, in summary, many will still pay surplus. Many will actually get worse. You have to look at each one on its own merits and not as a collective.

Crazy_Saver

Thanks dunston.

I hear lots of other insurance companies mentioned, my policy is with Eagle Star now trading as Zurich.

Does anyne know if their policies tend to recover?

I started this on another thread thinking this one was too old so sorry if anyone reads a duplication:(

dunstonh

Eagle Star Unit Linked funds arent too bad and a selection of those "should" go on to provide a surplus. Indeed, the last Eagle Star product I recommended using life funds (2.5 years ago - when they still traded under ES) has gone on to perform at 13.3% p.a. with a cautious fund spread. If the endowment needs 7% a year, then you can see it has the potential to exceed that.

So, if you have access to the unit linked life funds, then utilising those could be the best option. If it is with profits and doesnt have access to the unit linked funds, then I would be concerned and would be investigating whether its best to call it a day.

EdInvestor

So, in summary, many will still pay surplus. Many will actually get worse. You have to look at each one on its own merits and not as a collective.

Most With profits endowments will have a shortfall and won't recover. This is because of the stockmarket fall, the switch by WP funds out of equities into bonds, the cost of guarantees, and the high charges.

The Pru and a few very small mutuals and perhaps a few NU policies will come in with no shortfall and the odd surplus.

The rest of them will fail.

lindos90

for 'justcallmemug' re endowment-ask the fos for their complaint forms, they also send you a covering letter which includes several case studies (these may be on the web site too) there is a case study of a young couple who took out an endowment in 1992, (earlier than yours but stay with me,) the fos upheld the complaint, as the couple had no previous investment experience, were cautious people and did not want to take risks, these are quite wooly reasons but they were good enough to use by the fos in a case study! so if you spend some time on the way you present your information, stressing the advisor took advantage of your lack of experience,presented the pros and cons selectivley etc it might just swing things in your favour!
good luck!