Should I, Could I claim for endowment?

steveinuk_2

OK, here's the story;

An endowment mortgage deal was given to me by a broker in a branch of Bairstow Eves, back in 1996. I was 21yrs young and wanted to buy a house. I had no idea what I could borrow, but the advisor went through with me and sold me the Countrywide mortgage and endowment deal.

He didn't explain any other deals because he said an endowment was realistically the only thing I'd have a chance getting, being my low income at the time. He also helped me draft a letter to my employer asking them to confirm a slightly over exagerrated income and very optimistic bonus expectation. My employer signed this to 'help me out'.

The final thing he did, which I wasn't even sure was legal, was to inflate the price I was paying by the amount of the deposit I'd need, with a clause that the sellers had to 'gift' me that amount on completion and I'd use it to pay deposit, meaning I didn't even need to raise that. I was just happy I could buy a house and went with everything he said.

He gave me the estimated returns, which to me sounded good and said that going with history even if we went for the lower end of the scale it would still give me a return on top of paying the mortgage, but it will be likely I'd get a nice lump sum.

Remember, I was 21, wide eyed and niaive, I have since changed the mortgage (a while ago) paying a huge early repayment fine at the time, but kept the endowment going.

Over the years I've had a few shortfall letters, and always just increased the payment, thinking it was own stupid fault for taking it out, and 'now' I can afford to increase it. Some time ago I think they did write to me, but I just ignored it, again thinking I've no grounds, I bought the thing after all.

However, I'm now thinking that this guy was in the wrong to sell me something I could barely afford and which has since dwindled to a worthless piece of paper, and just because I can afford the higher repayments now to bring it in line, maybe I should lodge a claim.

Do you think I've got a case?

hcb42

No...I dont think you have a case on the grounds you have stated here - that it is coming up short or you couldn't afford it at the time. It is probably true you couldn't afford a repayment mortgage, rates were higher back then.

Then you have had the letters, and I believe these claims are out of time now.

You didn't have to incur the ERC charge necessarily, you could have let the mortgage run until it wasnt applicable, and took out a new mortgage and continued with the endowment..(not recommended obviously, but the charge could have been avoided - unless it was a terrible mortgage you bought!)

That's not to say you didnt have a naughty financial advisor - although gifted deposits, overstated incomes (not proven) and inflated bonus options were probably not all that uncommon either - but equally you agreed to all this, as did your employer!

I'd take the endowment on its own merits now - is it worth keeping going, and having a little savings plan, effectively, or cash in now and cut your losses/save elsewhere?

holly_hobby

If not from outset, you have been aware for a period of time that the endowment policy you purchased as a repayment vehicle for your mge was unlikely to meet the target ( and I would guess you have know for a number of yrs following endowment reviews done by all providers). Then depending upon when you recd your red letter, or became aware that the policy may not meet your requriements, you may now find that you are actually out of time for complaining of a mis-sale.

But, you could write and complain (and let them tell you you're out of time), but be sure what you are complaining about i.e are you merely unhappy that the endowment isn't on target to repay your mge & a lump sum, but were aware from outset hat the figs given at purchase were illustrations only, or are you saying that the adviser never discussed any risks associated with the policy, and led you to believe that the mge would be repaid no matter what & a lump sum on top. (and that the only uncertainty was how large that extra lump sum would be ?)

If you are not out of time for complaining, and the complaint is decided in your favour, the redress awarded will be based upon when you took the endowment mge out to the time you changed your mge to a capital and interest repayment basis. In broad terms, the redress will be the difference in what you would have repaid had you had a C&I mge from outset, compared with what you had paid on the endowment mge (with interest added).

To be clear, any redress awarded will be based on the time you held the policy as a mortgage repayment vehicle only - the fact you have retained it as a savings vehicle has no relevance.

Whilst the actions you talk about don't paint a positive picture of the adviser, you need to be aware that it appears you were wholly compliant and aware of his actions at the time, and thereby just as guilty of any lets say "mis-representation" of your financial situation and the basis of sale - whether you were carried along with getting your own property or not.

But I'm not here to give any moral lectures .. just helpful advice ... you could try a complaint, you've nothing to lose, if you're out of time thats bad luck, if the complaint is successfully defended thats too bad, if the complaint is upheld - you're up in the game.

Hope this helps

Holly

dunstonh

Most endowments are timebarred from complaint. The endowment issue is largely over now. You can check with the insurer if that is the case or not.

He gave me the estimated returns, which to me sounded good and said that going with history even if we went for the lower end of the scale it would still give me a return on top of paying the mortgage, but it will be likely I'd get a nice lump sum.

He gave you example returns using figures set by the regulator. So, that wont be a mis-sale in that bit because the regulator sets the rates used. Not the adviser. Below the rates it would have said "these figures are just examples. You could get back more or less than these". There would have also been a warning in there that said you could get back less than the target amount.

There is also the issue that English language could come into play. e .g.
You would get back more is a mis-sale.
You could get back more is not a mis-sale.
15 years on, which was said?

Endowment mortgages were typically cheaper than repayment mortgages. So, in that respect, the information is correct. It is an often forgotten point nowadays as many took them out for that reason more than any other.

Changing the mortgage and incurring an ERC was your own choice and not a mis-sale reason. Virtually all lenders allow you to move to repayment basis with no ERC charged. its normally a small fee around £50-£150. The only way you would get an ERC is if you changed lender or changed deal.

Back in the 90s right through to mid 2000s, a good mortgage adviser was seen as the one that got you the mortgage. I am sure that in 1996, had one mortgage broker told you that you cant get a mortgage and another told you that you could by doing this that and the other, then you would have considered the one that got the mortgage as the better adviser. Its wrong to lie and give false info (although you are party to doing that so its not something you really want to admit to) but they were effectively doing what the public wanted them to do.

holly_hobby

The endowment is mis-sold if it is proven (or from the lack of documentary evidence unable to be defended), that the adviser led you to believe the policy was at least guaranteed to repay your mge - thats the bottom line - any complaints regarding potential surpluses are not relevant.

From what you have said you were 21, and haven't mentioned you had any other investment vehicles or exposure to such. If so, you should be classed as an "unsophisticated" or "cautious" investor (especially when in respect of a mge repayment vehcile. If the endowment is a unit linked contract (than without reviewing the Point of Sale docs) that should really be an uphold regardless, as this type of investment vehicle was not suitable to your risk profile. If its a "with profits" plan - which is classed as suitable to cautious investor, than the point of sale docs (if any remain)will be thoroughly reviewed, including the fact find and the case handler will come to a decision based upon their findings. THATS OF COURSE IF ITS NOT TIME BARRED AS I PREV MENTIONED.

Have a look at the Financial Ombudsman Service website for consumer guidance notes.

Good luck

Holly

dunstonh

From what you have said you were 21, and haven't mentioned you had any other investment vehicles or exposure to such. If so, you should be classed as an "unsophisticated" or "cautious" investor (especially when in respect of a mge repayment vehcile. If the endowment is a unit linked contract (than without reviewing the Point of Sale docs) that should really be an uphold regardless, as this type of investment vehicle was not suitable to your risk profile. If its a "with profits" plan - which is classed as suitable to cautious investor, than the point of sale docs (if any remain)will be thoroughly reviewed, including the fact find and the case handler will come to a decision based upon their findings. THATS OF COURSE IF ITS NOT TIME BARRED AS I PREV MENTIONED.

I will take issue on that point about risk. The fact its unit linked doesnt indicate risk profile. The type of unit linked fund would do that.

Also, whilst I agree with you on the experience side, that is a very post MIFID stance. Not so much 1996. We also need to remember that many With Profits funds are today classed closer to medium risk and on par with balanced managed funds compared to what they were classed as back in 1996.

However, its all shades of grey and lets face it, most endowment complaints that resulted in redress were not because they were proven mis-sales but because the record keeping and quality of reports back then was dire compared to the standards today. You were more likely to be paid redress due to bad or missing documentation than you were for it being a proven upheld complaint.

holly_hobby

I agree on missing docs, I was an advisor myself in the mid 90s and I am a compliance consultant, and heavily involved in this area when it initially blew up and afterwards running complaint teams for various large FS companies - so do know from first hand experience what is considered suitable advice and a defend and what fails to meet the basic minimum requirements ... (same goes with FOS approach to the same).

Unit linked (as a mge repayment vehicle) - are not suitable for cautious, or first time investors when in connection with a mortgage - period.

With profits (as a mge repayment vehicle) - are classed as suitable for cautious or first time investors IF there is documented evidence that the risks were explained, or the complainants responses to the standard and case handlers questions indicate they did know there were risks (their occupation also plays a part in this) - its a defend. If there are docs present that indicate gtes were given, and I have seen Reason Why/Recommendations where the adviser actually wrote the sum assured on maturity was gted, or diagrams illustrating a gte were present, or indeed there are no POS docs & the complainants responses do not indicate any knowledge of the risk that is an uphold.

Unfortunately the training that advisers generally recd for competing paperwork, and that reqd to pass an internal new bus compliance check were minimal in the lates 80s & 90s, and left lots of companies open to justified complaints. I was lucky that the company I worked for, and was trained as an adviser were stringent even then, and the recommendation had to fully document why the client had rejected one mge repayment method for another, and clearly note in the case of an endowment mge, that the illustrations were just that, illustrations and that nothing was gte'd, except the GSA on death.

Blimey it was tedious at the time, but boy was I glad we had to do it that way, when yrs later the markets collapsed & the complaints started rolling in ... !!!!

Anyway, I digress .... good luck to OP whichever you decide to do ...

Holly