Is This Norwich Union Deception re Endowment Compensation?

Nix

I'm sure we are not alone in our predicament. Any others in the know or in a similar situation, I would appreciate their feedback.

Brief history:

* 1992 approached Leeds Permanent Building Society (now taken over by the Halifax) to take out a 25 year repayment mortgage on our first house. We were persuaded to get an endowment (Norwich Union) instead because of promises that it would not only pay off the mortgage but we would have a nest egg as well. We were NOT told of any risks of this type of mortgage.

* 2000 received letter from the N.U. stating that the policy may suffer a shortfall.

* June 2000 telephoned the N.U. to express our concerns.

* Sept 2000 letter from the N.U. saying that their investigation was complete. They stated that 'Before proceeding further, it is important to note that the Leeds Permanent Building Society were Appointed Representatives of Norwich Union in respect of life, pensions and investment business only. Our review has therefore been conducted on this basis. Any advice you received regarding your mortgage facilities (ie whether to take the mortgage on an Interest Only or Capital & Interest basis) was and remains the responsibility of the Halifax plc.'. They refused to uphold our concerns.

We wrote back stating that we did not accept the outcome of N.U.'s investigation.

[Perhaps a fresh complaint to the Halifax was needed?]

* Oct 2000 letter from N.U. reiterating that they could not uphold our concerns stating 'We believe endowments will continue to represent good value for money even if the actual maturity payouts are lower than originally expected.'. The letter did say that we could refer to the PIA Ombudsman by 12 March 2001.

* Feb 2001 good news from the N.U.! In a letter they now had a 'promise to policy holders' to top up in the event of a shortfall. They 'believed our policy to be currently projected to repay the target amount when it matures.'. This effectively put our minds at ease.

* August 2001 oh dear, in contradiction to previous letter, N.U. now state that our policy was no longer on track to repay the mortgage. Their promise now becames 'may receive an amount under our promise to policy holders - subject to certain conditions'. A phone call to N.U. confirmed our fears that there was no longer any guarantee that there would be the required top up necessary.

* May 2005 after continued bad news, we decided to cut our loses and cash in the endowment and change our mortgage to repayment.

* Summer 2006 we write to the Ombudsman who writes to Halifax, who writes to N.U., who writes to us stating case already investigated in 2000 and is therefore closed.

According to N.U. (see Sept 2000 statement from N.U.), it was the Leeds/Halifax's responsibility for the endowment policy sold to us, not them. If this is true then surely we are entitled to a fresh claim from the Halifax? If it isn't true, have we been subjected to some form of deception?

Yes, we should have persued the Ombudsman channel before March 2001 but didn't partly because of the promise from N.U. and partly because we were fed up banging our heads against a brick wall. At that stage we genuinely weren't aware that compensation could be claimed.

20/20 hindsight vision is a wonderful thing!

Feedback please...

dunstonh

* August 2001 oh dear, in contradiction to previous letter, N.U. now state that our policy was no longer on track to repay the mortgage. Their promise now becames 'may receive an amount under our promise to policy holders - subject to certain conditions'. A phone call to N.U. confirmed our fears that there was no longer any guarantee that there would be the required top up necessary.

There is still some guarantee just watered down a bit. They will pay upto £5000 or the shortfall, whichever is lower. So, if the endowment comes in at £2000 short, they will make that up and pay out the full amount. If it comes in £6000 short, they will pay £5000 extra giving just a £1000 shortfall.

Yes, we should have persued the Ombudsman channel before March 2001 but didn't partly because of the promise from N.U. and partly because we were fed up banging our heads against a brick wall. At that stage we genuinely weren't aware that compensation could be claimed.

You cannot claim compensation. Financial services complaints dont work like that. You get financial redress on upheld complaints to put you in the position if you hadnt done that transaction. That has been the case since the FOS was began. Had your complaint been upheld in 2001, you would have been paid the redress if necessary as you would be now. Nothing has changed on that front.

You made your complaint and didnt pursue it to the FOS when you had the chance. You surrendered it thinking the guarantee had gone when it hadnt and now you are missing out on the windfall pencilled in for 2008. Plus 2005-2006 performance on NU endowments has been quite good.

So, with hindsight you have missed out on a number of things and surrendering the endowment probably wasnt the best action. By not pursuing the complaint further, you accepted the outcome. You cant go back and change your mind later if things change again unless there are exceptional circumstances. 5 years on would require being in a coma for that long or similar!

If NU had upheld your original complaint, what did you think they would do for you seeing as you thought no "compensation" was payable?

Nix

dunstonh - thanks for the reply.

There is still some guarantee just watered down a bit.

Watered down being the operative phrase. At that particular time, the projected shortfall was between £8k and £13k on a £34k mortgage. If the maximum guarantee was £5k, then you can appreciate that it didn't look even near enough.

surrendering the endowment probably wasnt the best action

Perhaps yes, perhaps no. Only time will tell!

Having said that, we are so glad that we used the cash from selling the endowment plus a few overpayments and are now sitting on a low mortgage that we KNOW will be paid off - no worries! Call it simple peace of mind but it's a precious commodity.

You cant go back and change your mind later

Yup, fully appreciate that. We live and we learn.

I guess that people tend to use the word 'compensation' when they really mean financial redress. You'll just have to forgive us on that one! :rolleyes:

I suppose my real question with this post is, is there truth in the statement N.U. made about who's responsible for selling us the endowment in the first place ie Leeds/Halifax?

dunstonh

Watered down being the operative phrase. At that particular time, the projected shortfall was between £8k and £13k on a £34k mortgage. If the maximum guarantee was £5k, then you can appreciate that it didn't look even near enough.

Projections are no indication of what you are going to get. They are just examples. They can understate the position of some and overstate with others. Had you kept it running, those projections would have improved and the gap reduced. With the cheaper monthly payments on endowment compared with repayment, the proposed 2008 windfall, then it could still have been better.

These were/are all unknowns at the time (and some still are). However, you made alterations and seem to be happy with the current position.

I will let DOTW answer your bold question as he will know the Leeds/NU position better than anyone else here. Hopefully he will be along soon to answer that.

dreamylittledream

Nix wrote:

dunstonh - thanks for the reply.



Watered down being the operative phrase. At that particular time, the projected shortfall was between £8k and £13k on a £34k mortgage. If the maximum guarantee was £5k, then you can appreciate that it didn't look even near enough.



Perhaps yes, perhaps no. Only time will tell!

Having said that, we are so glad that we used the cash from selling the endowment plus a few overpayments and are now sitting on a low mortgage that we KNOW will be paid off - no worries! Call it simple peace of mind but it's a precious commodity.



Yup, fully appreciate that. We live and we learn.

I guess that people tend to use the word 'compensation' when they really mean financial redress. You'll just have to forgive us on that one! :rolleyes:

I suppose my real question with this post is, is there truth in the statement N.U. made about who's responsible for selling us the endowment in the first place ie Leeds/Halifax?

In answer to your question - no NU were incorrect in their 2000 rejection that Halifax/Leeds Perm were responsible for the the advice.

Leeds were 'tied' (appointed representatives) of NU at the time - therefore NU were responsible for the advice given by the Leeds Perm member of staff.

The complaint therefore was rightly dealt with by NU.

The mortgage advice area is muddier - the advice given relating to a mortgage was not regulated and therefore not covered by NU - however in recommending an endowment and ensuring it was suitable the adviser did have to consider and discuss the other options available (such as a repayment mortgage). And NU were responsible for the advice given by their representative.

This is a point that even the FOS don't seem to consistantly concede at the more junior level but its explicitly stated in Regulatory Updates 72 and 80 (regarding advice on the sale of policies issued by the PIA in 1999).

In your case I suspect you were not dealt with fairly - however as you did not appeal to the PIA Ombudsman within the six month window you are effectively out of options other then court action to pursue any compensation.

defender_of_the_weak

Its not so much a deception as misunderstanding. What the letter is trying to say is that the actual choice of mortgage ie interest only or capital repayment was a decision/recommendation by the Leeds. The endowment was also sold by the Leeds but in their capacity as appointed representatives of Norwich Union for insurance products. I do appreciate how hard it sometimes is to draw a distinction between the two transactions when they seem so linked

Bottom line is that as you did not pursue FOS at the time, there is nothing further to be done

EdInvestor

IMHO the real bottom line is this:

Nix wrote:

Having said that, we are so glad that we used the cash from selling the endowment plus a few overpayments and are now sitting on a low mortgage that we KNOW will be paid off - no worries! Call it simple peace of mind but it's a precious commodity.

When people get back to where they should have started from, it makes a world of difference.

Nix

dreamylittledream and defender of the weak - thanks for your valued input.

This subject appears to be one of those murky areas that only specialist solicitors dare get involved in! A bit like my work with CCTV and the DP & HR acts.

It seems the consensus of opinion here is that there is little to no hope of financial redress. I was hoping that the misleading statement made by NU could be used in bringing them to account for mis-selling the endowment. This caused us a lot of anxiety at the time. We'd still like to pursue this as this could be our last and only shot. Perhaps the CAB could enlighten us re the legalities?

dunstonh - I must confess my puzzlement to your optimism re existing endowments. My brother-in-law has just received over £3k in compensation, his circumstances being almost identical to ours. Main difference with him is that he didn't complain until recently when the there was a lot more help and advice around. If present endowments are now experiencing quite good performances and a supposed 2008 windfall, why are they making up a shortfall to the tune of over £3k? That, surely, is proof that endowments are still a bad investment?

EdInverstor - you hit it on the nail! Peace of mind makes for a happier world.

dunstonh

I must confess my puzzlement to your optimism re existing endowments. My brother-in-law has just received over £3k in compensation, his circumstances being almost identical to ours. Main difference with him is that he didn't complain until recently when the there was a lot more help and advice around. If present endowments are now experiencing quite good performances and a supposed 2008 windfall, why are they making up a shortfall to the tune of over £3k? That, surely, is proof that endowments are still a bad investment?

Endowment is just a tax wrapper. Its where they are invested that matters. There are good endowments and bad. There are an awful lot of people that are not getting any redress on upheld complaints as the endowments have recovered to on target or surplus position. Also, the redress is based on the surrender value of the endowment. If the surrender penalty of your brother's endowments was say £4k, then at that point, the endowment is actually £1k better than being on repayment.

There are many flaws in the redress process and one of them was calculating the redress just after a stockmarket crash which can be highly beneficial in the long run but appear damaging in the short term. This is reflected in people getting warning letters right up until maturity but then being paid a surplus.

The Evening Standard earlier in the year ran an article with the headline "Proof that endowments weren’t such a bad idea". Its main content was that the better ones are doing alright.

The article finished with:
Unfortunately, it is probably too late to save them. Sales of new policies have virtually disappeared and, like final-salary pension schemes, they have fallen victim to well-intentioned but ultimately destructive consumer-driven regulation. Such rules, designed to protect the public, end up depriving people of the very products they ought to have.

Whilst I wouldnt go that far as say endowments should still be with us, the concept of investment linked mortgages is still valid and those I still have running on ISA basis are all on track at this stage to either have big surpluses or pay the mortgage off around 6 years early. The concept isnt flawed. The application of it was.

In summary, too many good endowments have been incorrectly surrendered and too many people are holding on to poor ones with misplaced belief that they may get better. The common factor is that the endowments were not analysed before making that decision.

Nix

dunstonh - agree that the execution of any financial venture is crucial to its' success.

The article finished with:
Unfortunately, it is probably too late to save them. Sales of new policies have virtually disappeared and, like final-salary pension schemes, they have fallen victim to well-intentioned but ultimately destructive consumer-driven regulation. Such rules, designed to protect the public, end up depriving people of the very products they ought to have.

Interesting viewpoint.

The common factor is that the endowments were not analysed before making that decision.

Don't forget that the mis-selling of endowments was the final nail in their coffin!

We are all so much wiser now. When approaching a Bank/BS you assume that they are acting in your very best interest. How naive!

Have written to the CAB and now awaiting their reply...