Got a compensation offer - advice please

zappahey

Got my letter today from Winterthur (formerly Colonial Mutual policies), offering compensation for misselling.

There are 2 policies, each with a target of £15k.

The offer is £4421.52 and leave the endowments running or surrender them for £16024.44 and convert the remainder of the £30k interest only mortgage to repayment.

Any advice on the best plan of action is welcome.

The way I see it is that I have 3 options:

1. Take the £16k, reducing the repayment element to £14k, keep paying the current monthly payment plus the investment element of the monthly endowment payment.

2. Take the £4.4k, pay that off of the mortgage, maintain mortgage payments at current level and keep paying the £44 endowment payment.

3. Take the £4.4k, pay that off of the mortgage, maintain mortgage payments at current level, make the endowment "paid up" and pay the investment element of the endowment payment towards the mortgage each month.

The information that I have at the moment is:

Total Monthly endowment Payment: £44
Mortgage £110k of which £30k is repayment only. just moved so 20yrs until it's all paid (assuming no overpayments)

Endowment policy 1 taken out 12/1987
Target is £15k
Matures 12/2012
Current Surrender value £6173.65

Endowment Policy 2 taken out 09/1989
Target is £15k
Matures 09/2014
Current Surrender Value £5429.27


Having just moved house, I can't quite put my hands on the documentation at the moment but, from memory, the guaranteed value and declared bonuses totals around £15k. I don't recall the split between them.

I don't know if it's relevant but these endowments were presold and the figures include refunds of premiums plus interest for the period before a mortgage was taken on. these refunds are £1242.01 and £598.56 respectively.


Anything I've missed? Any suggestions?

zappahey

No thoughts?

daveonline

Wouldn’t like to give you bad advice for your own circumstances but we had a Winterthur endowment that we complained about. Basically they paid back all our monthly payments and added simple interest, I think this is a standard method for calculating mis-selling policies.
We decided to cut our losses as we still had 15 years to run so took the payment and went for a repayment mortgage.
This was about 2 and half years ago.

dreamylittledream

daveonline wrote:

Wouldn’t like to give you bad advice for your own circumstances but we had a Winterthur endowment that we complained about. Basically they paid back all our monthly payments and added simple interest, I think this is a standard method for calculating mis-selling policies.
We decided to cut our losses as we still had 15 years to run so took the payment and went for a repayment mortgage.
This was about 2 and half years ago.

That was the standard method for caclualting redress for mortage endowments a few years ago - the method used now compares the cost and capital reduction of a repayment mortgage with the actual endowment mortgage to - the difference being the redress. As the OP also had a forward sale a refund of premiums with interest to the date the mortgage began is also added.

In answer to the OP's question, the best bet would be to seek independant financial advice, the cost of which should be met by Winterthur as part of their offer. You have listed most of the options (another would be to take the compensation and then sell the endowment on the second hand market as opposed to surrendering it).

It should be noted you can accept the compensation offered not (the 4.4k) and surrender the policies at a later date if you chose - surrendering the policies now is not compulsorary and neither does the option go away if you just take the compensation offer now.

EdInvestor

I assume these are With profits policies?

If so please call up Winterthur and ask them to tell you the investment mix of the old Colonial Mutual fund. We need to know the percentage invested in equities, property, bonds and cash, to get an idea of the likely future performance of these endowments.

zappahey

I doubt I'll get to call them tomorrow as it's the office party :beer: but I will do it next week and report back.