Mis-sold Endowments - PEPs?

Hey_Dude

Probably a dumb question from His Dudeness.....

In the early 1990s I took out an interest-only mortgage with a PEP as the investment vehicle to pay off the capital.

The PEP has continued - is now an ISA - but it's current value doesn't seem to be increasing in line with the money I'll need to settle the whole mortgage value.

Now there are some other factors that mean that I will cope - but my question to the great and good - are PEPs dealt with under the same rules as endowment in terms of mis-selling?

MTIA

Dude

defender_of_the_weak

PEP based mortgages are treated virtually the same as endowments, given that they relied on investment returns hitting the target over the term of the policy. If the possibility of shortfall was not adequately explained or the underlying risk clearly spelt out then you may have a case. You may have been receiving shortfall letters and the time to compain also works the same way as endowments, so if you think you have a complaint you should deal with it asap

dunstonh

It would be worth posting some information on the PEP/ISA as well. Over the last 3 years you should have seen some significant gains and whilst you were almost certainly in a shortfall position 3 years ago, it would have improved a lot since then and you may find you are back on track or in surplus again.

The fact you say it doesnt seem to be increasing suggests a problem.

Hey_Dude

dunstonh wrote:

It would be worth posting some information on the PEP/ISA as well. Over the last 3 years you should have seen some significant gains and whilst you were almost certainly in a shortfall position 3 years ago, it would have improved a lot since then and you may find you are back on track or in surplus again.

The fact you say it doesnt seem to be increasing suggests a problem.

Okay.

I bought my first house in February 1995 - interest-only mortgage of £39,178.

The IFA told me all about PEPs - emphasised the tax-free element - so I went for it - £50 a month - with the £39,178 being the 'target mortgage amount'.

I have one document from the IFA - it reads - based on the 'target mortgage':

"Projected future value - 5% growth £38,700 - 7% growth £50,200 - 9% growth £65,800" - the 7% column is greyed - doesn't say so but it catches the eye if you see what I mean.

In late 1999 I moved house - increased the mortgage to around £64,600 - the same IFA did his sums - told me to increase the PEP/ISA to £90 a month.

I've a late 1999 letter from the IFA asking the PEP/ISA provider to raise the 'target' to £64,600.

In 2003 someone close to me passed away - I was able to make a capital repayment and bring the £64,600 down to the £34K mark (but I miss you more than all the money in the world my old friend :beer: ).

The PEP/ISA - I've never missed a payment and not touched the investment.

It's value @ 3 Jan 2007 = £18,039

And some examples how it's been over the years - I only started paying any attention from around 2000...

...18 Sep 2000 £7,255
...12 Sep 2001 £6,316 (to be expected I guess - it was a grand higher before 9/11)
...21 Aug 2002 £7,186
...8 Sep 2003 £9,168
...12 Sep 2004 10,522
...9 Sep 2005 £14,137

So Dudes - am I in the poo? Does it look like I was mis-sold?

It does seem to have down quite well over the last 3 years now I look at it...am I being completely dumb and have nothing to worry about?

MTIA again,

Dude

dunstonh

Were you mis-sold?

Probably not. You appear to understand these things can go down as well as up from your comments above and a potential shortfall is not something you can claim for. Its whether you knew it involved a risk or not and that is the crux of virtually all complaints. If that is something you became aware of after the event, then you could still complain. Some complain even knowing that they werent mis-sold in the hope the documentation is poor and they get lucky (and very many have).

It does seem to have down quite well over the last 3 years now I look at it...am I being completely dumb and have nothing to worry about?

There has been much in the financial press about the way the endowment compensation has been handled. You expect a stockmarket crash periodically and regular contribution plans can gain from that (you have) as they buy units much cheaper after the crash and when the recovery comes, they are the ones go up the most.

Many endowments that were off track are now getting back on track and heading for surplus (although bad examples are still weak and a few really poor examples are getting worse). The redress method was highly flawed and should have been left until maturity.

If you can tell us your maturity/final date (or just how many years to go), either Ed or myself will stick the figures in and give you an indication of what is possible.

Also, who is the PEP/ISA provider and what are the funds. It will give us an idea of their potential for future growth.

Hey_Dude

dunstonh wrote:

If you can tell us your maturity/final date (or just how many years to go), either Ed or myself will stick the figures in and give you an indication of what is possible.

Also, who is the PEP/ISA provider and what are the funds. It will give us an idea of their potential for future growth.

Many thanks for your comments Dude - you seem to know your stuff!

The maturity date is January 2020.

Provider = Fidelity.

Fund = Wealthbuilder.

What do you think?

Dude

dunstonh

13 years paying £90pm @ 7% p.a. = £22,568
13 years @ 7% for the £18,039 = £43,471

Put the two together and you have £66,039. That is above your last "required" figure of £64,000 before you paid some off.

One thing you really need to be looking at now is improving the fund choice. Nothing wrong with the fund you have apart from it being just one fund. Your 18k already built up should now be switched into more funds to increase diversity and future potential.

You can do this yourself, ask the original adviser or get any new IFA to do it for you.

Hey_Dude

dunstonh wrote:

13 years paying £90pm @ 7% p.a. = £22,568
13 years @ 7% for the £18,039 = £43,471

Thanks...

From Feb 1995 until August 1999 it was £50 a month.

Had to increase to £90 a month from the 1999 date after I moved house - does this make a difference to your calculations?

Dude

dunstonh

Makes no difference as i have calculated from this point onwards. i.e. current value and £90pm from now. What went before doesnt matter.