Endowment. Court action?

SaveTheEuro

Would it be a good idea or a crazy idea to go to court over a poor endowment pay out?

My 25 year endowment is paying out at 57% below the projected figure.

The 1986 brochure says "because we believe it is better to err on the side of caution, rather than over optimism, your Minimum Cost Endowment Plan takes a conservative view of the bonuses you should receive. Past performance suggests that you will not be disappointed by the total value of your policy when it matures."

It wouldn't cost much to start an action in the small claims court. Has anyone else done this?

noh

No chance of winning whatsoever. That's why no one has done this.

dunstonh

Would it be a good idea or a crazy idea to go to court over a poor endowment pay out?

Crazy x10

My 25 year endowment is paying out at 57% below the projected figure.

What projected figure? Endowment providers never issue soemthing that gives them a liability. They issue example projections using example growth rates but they have no liability as they quite clearly state they are just examples.

The 1986 brochure says "because we believe it is better to err on the side of caution, rather than over optimism, your Minimum Cost Endowment Plan takes a conservative view of the bonuses you should receive. Past performance suggests that you will not be disappointed by the total value of your policy when it matures."

All of which is quite true based on 1986 information. The decades before that going back many years consistently saw payouts from endowments far iin excess of target. Taking a conservative view and offering an opinion is not committing themselves to anything.

It wouldn't cost much to start an action in the small claims court. Has anyone else done this?

You would likely fail on three points

1 - its time barred - 15 year long stop time bar.
2 - if they didnt sell you the policy then they have no liability for the sale
3 - nothing you have written above indicates wording that gives them any liability.

A possible issue is that you have suffered no loss. A typical endowment mortgage was 10-15% cheaper per month than a repayment mortgage. Over 25 years if you take say a £20pm saving, that equates to £6000 saved in repayments. Many people forget that one of the most common reasons for doing endowments was the lower monthly cost.

SaveTheEuro

Great responses. Thank you. You've given me material to ponder.

colin13

SaveTheEuro wrote: »

Would it be a good idea or a crazy idea to go to court over a poor endowment pay out?

My 25 year endowment is paying out at 57% below the projected figure.

The 1986 brochure says "because we believe it is better to err on the side of caution, rather than over optimism, your Minimum Cost Endowment Plan takes a conservative view of the bonuses you should receive. Past performance suggests that you will not be disappointed by the total value of your policy when it matures."

It wouldn't cost much to start an action in the small claims court. Has anyone else done this?

i agreee with your sentements ,,they sold us endowments of the promise of paying of morgage ansd also having a lump sum at maturity,,they say our endowmens aint gonna pay the ammount targetted,,never mind the extra ,,they said would be there,,

dunstonh

they sold us endowments of the promise of paying of morgage

If you have evidence of that then you complain to the seller and it would be an easy upheld complaint. However, if you are interpreting the wording wrong then they wont.

For example:
"your endowment could pay your mortgage and provide you a surplus lump sum on maturity"
or
"your endowment would pay your mortgage and provide you a surplus lump sum on maturity"

One is a mis-sale. One is perfectly acceptable.

izools

Indeed. My mother's old endowment from 86, then 88, neither of them contain any promises, any guarantees, any "Will Definitely"s; it's all made abundantly clear at point of sale and in all the documentation you had to read and sign that you are only agreeing to "Projections", "Estimations" and "Could be"'s.

Ergo, mother is having to take out a 14 year repayment mortgage at the age of 60. !!!!!! happens, but in this instance, it's because all of you (including my mother) were so keen to get a house, they didn't stop to think about guaranteeing their futre stability with a Repayment mortgage.

Either that or you / them simply couldn't afford a repayment mortgage.

Either way, you shouldn't blame a company, who fulfilled their end of the bargain to the letter, for your own selling your self short.

Just get a remortgage.

magpiecottage

dunstonh wrote: »

1 - its time barred - 15 year long stop time bar.
2 - if they didnt sell you the policy then they have no liability for the sale

If the insurer was responsible for the sale then it would probably fall under FOS jurisdiction - though a number, such as the Co-Op, were not under members of the Insurance Ombudsman Bureau at the time and could probably refuse to allow FOS to consider it.

If FOS can investigate, it currently ignores the 15 year long stop.

However, if you do have a shortfall it is probable that a complaint is now able to be timebarred because of other reasons and, in any case, there was only a requirement that they should not misrepresent, not that they should provide advice or assess suitability.

FOS will also refuse to investigate complaints about investment performance.


In addition, in the mid 1980s, firms also not required to use specified rates of return (that only came in during 1988). Most mortgage endowments were set up so that the guaranteed basic sum payable on maturity plus 80% of the prevailing annual bonus rate would match the mortgage. If the annual bonus rate had been maintained you would have cleared the mortgage and had a little extra, with the possibility of a terminal bonus turning it into a big extra.

Changes in economic conditions, coupled with a move to greater emphasis on terminal, rather than annual, bonus (which pushes much of the investment risk from the insurer to the policyholder) have changed this.

Add to this increased regulatory cost, the cost of paying redress for lots of missales (most of the pension review redress came from With Profits funds), the Financial Services Authority forcing insurers to bring With Profits funds out of equities just as the smart money was moving back in all conspired to produce poor returns.

dunstonh

You are right about the FOS but if the OP is looking at court action, then the long stop would surely apply?

SaveTheEuro

I accept that court action would be a long shot and I am grateful for your opinions.

This endowment was a 25 year contract. It's only after making the 300th and final monthly payment that the customer becomes aware of the exact figure he is being paid. On that basis I think the "loss" is only occurred now, and that a claim is timely.

It is correct that endowments were based on "assumptions" and what you "could" receive but the customer wasn't given a range of projections. He was sold the product with just one illustration. That was the only figure dangled before him.

A company that says it is conservative and erring on the side of caution should not be able to walk away from that. In retrospect, the company boasting to be a leading financial institution should have said it was being wreckless and crazy in assuming investment returns for the next 25 years would match those of the previous 25 years.

I've found the courts to be very reasonable, and recognise when customers have been led up the garden path. I've taken a couple of companies to the small claims court and won both times. But I do accept any action of this type would be highly ambitious.

dunstonh

This endowment was a 25 year contract. It's only after making the 300th and final monthly payment that the customer becomes aware of the exact figure he is being paid. On that basis I think the "loss" is only occurred now, and that a claim is timely.

Losses would have been showing on example projections sent with the statement for over a decade.

It is correct that endowments were based on "assumptions" and what you "could" receive but the customer wasn't given a range of projections. He was sold the product with just one illustration. That was the only figure dangled before him.

The rules didnt require it at the time so no misrepresentation would have existed. Remember you are not looking at the more consumer friendly FOS here. You are looking at the court and the onus is to show the court there has been misrepresentation. Did the illustration also come with the usual risk warnings for the era?

You say the figure was dangled before him. So, that suggests he didnt buy direct but used an agent, adviser, solicitor or accountant. The insurer is only liable if an agent was used. Not if one of the others was used.

A company that says it is conservative and erring on the side of caution should not be able to walk away from that. I

That is not the same as guarantee. That indicates some risk exists. How will he combat the other documentation in court that shows the risk warnings? you cant just take snippets in isolation and expect to be successful in that.

I think the first thing is to find out if the insurer has any liability otherwise he will be taking the wrong person to court.