Endowment Problem?

Crystalflute

Hi there. First time posting here. My husband turned 65 in December and our endowment is supposed to pay out in Apri 2011 (4 months AFTER his retirement). The mortgagee has said that there is a chance it won't be able to pay all of the money in the endowment, i.e., that there will be about a £3000 shortfall. Somewhere along the line, I thought they had missold us the endowment because my husband would be retiring BEFORE the pay out date of the endowment - something that wasn't even considered at the time we took out the endowment. So my questionn is, is this correct and if so, what do I do about it now?

Thanks in advance.

TEDDYRUKSPIN

Unfortunately, you will not get an answer or true answer from this board. Anything linked with an endowment is a very sensitive place and you should seek independent financial advice.

TonyMMM

You should have received a number of letters from the endowment provider telling you about the possible shortfall - they usually used a Red/Amber/Green system to tell you how it was going - what did you do when you got them ?

I stand to be corrected,but I think the mis-selling complaints process for endowments is time-limited and runs from the date of the first letter warning you of a potential shortfall ..... it may be too late now to claim now.

dunstonh

omewhere along the line, I thought they had missold us the endowment because my husband would be retiring BEFORE the pay out date of the endowment - something that wasn't even considered at the time we took out the endowment. So my questionn is, is this correct and if so, what do I do about it now?

You are right in one respect but also wrong at the same time.

Mortgages should ideally be recommended to complete before retirement age. However, its generally not possible to match the day you start a mortgage on your birthday. You would effectively be asking for your lender to only lend you money on one day of each year.

So, it is generally considered acceptable to allow the mortgage to run past the scheme retirement age as long as its no more than 6-12 months. Typically you would expect 6 months or less as if it was months 7-11 months, you would just lop a year off the mortgage term and have it finish upto 6 months before (assuming you could afford it).

Also, there is no regulatory requirement for mortgages to finish before retirement. Since 1988 (retrospectively as it wasnt until the 90s that it was considered but backdated to post 1988 cases) it has been expected that advised mortgages should recommend terms that finish before retirement. However, that can be overruled with justification. e.g. you want to keep the monthly payments lower and can afford to make repayments within retirement as long as its for only x number of years blah blah....

So, the bottom line is that with it only being 4 months past retirement, it is within an acceptable window. If it was 4 years then its a different matter.

something that wasn't even considered at the time we took out the endowment.

It wouldnt have been. 20 or so years ago, people coming to the end of their mortgage terms were paying £10pm. It was generally considered back then that your mortgage costing you £200pm would, 25 years later, be the equivelent in spending power of £20. The focus in the 80s and early 90s was more about getting on the ladder and paying as little as possible per month. Not whether it will finish within a couple of months of retirement or not. The sustained period of low inflation hasnt seen debts being eroded in real terms in the same way it was back then.

magpiecottage

DunstonH is correct. It is also possible that a delay between the original advice and the mortgage actually starting resulting in the endowment maturing a little later.

Actually, adding the term of the policy to your age and seeing if it is more or less than your retirement age is not exactly the hardest calculation in the world - so it does beg the question why they didn't spot it at the time and a complaint on those lines is a bit of an admission of the complainant is thick!