Aviva - Mortgage Endowment Promise is 'not applicable'

Jaybee101

Hi,

Have been reading the various threads on Aviva Endowments with interest. I'm aware of the problems of endowments and the shortfall woes so switched to a full repayment mortgage in 2005 so this is now purely an investment vehicle with life-cover. I haven't given it much thought until now (just about to move again) and have been reading up on the threads about Aviva endowments here.

I have a particular concern though with my policy and the Mortgage Endowment Promise which the letters I get from Aviva say doesn't apply to my policy.

In 1995 I took out a Norwich Union Endowment policy for 25yrs (maturing 2020) targeting £65k to cover my then held £65k interest-only mortgage. The policy is called a "Flexible Mortgage Plus with Lifetime Benefit", it has critical illness cover too. The units it buys are invested in a "with-profits" fund. The policy costs £130 pcm.

Looking back on old NU yearly statements it doesn't mention anything about the MEP on the letters but then in 2003 I got a letter from NU saying basically "this is under performing, make arrangements". In that letter and subsequent leaflets it talks about the NU MEP and "subject to certain conditions you could receive up to a maximum of £x under our 'Promise to Policyholders'".

Once AVIVA comes into existence the statements get easier to understand but of course, highlight the shortfall using the RED ALERT box and three projection figures.... but, and here's my current concern:

I now realise the AVIVA letters say "The promise does not apply to this policy as there was no projected shortfall on the 6% projection when the Promise was calculated on 31st December 1999". ??

So the MEP applied under NU but not AVIVA? Surely this can't be right? Wondering what my next move should be?

I have 8yrs left to run but despite all the letters, leaflets and guff that I've hoarded over the years I have no real idea what a final maturity figure would be with the "terminal bonus" I've read about on here and assuming the MEP should apply as it did back in 2003.

I think I'm going to have to query why AVIVA say the MEP status does not apply and perhaps get a projection to maturity which would need to include the MEP figure. Is this easy? Not something I've ever done. I would appreciate any advice! Thanks.

dunstonh

So the MEP applied under NU but not AVIVA? Surely this can't be right? Wondering what my next move should be?

The MEP has not been changed since 2003/4 when they put a cap on the amount.

If you had no shortfall back in 2001 (ish on the date) then you did not qualify for the MEP. The 2003 or 2004 statement showed the maximum benefit you got under the plan. I don't believe any future statement after that has made reference to the MEP in any such detail. Although it does still exist for those that had it.

I think I'm going to have to query why AVIVA say the MEP status does not apply and perhaps get a projection to maturity which would need to include the MEP figure. Is this easy?

1 - yes you need to get Aviva to clarify why you had an MEP in 2001 to 2003 but not now. That would appear to be an error (assuming you had a shortfall in 2001)

2 - you will not get a projection that includes the MEP. The projection method set down by the FSA does not allow it. Although it doesnt take much to add it in manually yourself.

[Deleted User]

Hi Jaybee101

I'd like to investigate this for you. If you can please email me [EMAIL="David.hyam@aviva.co.uk"]David.hyam@aviva.co.uk[/EMAIL] and copy in our team mailbox [EMAIL="social@aviva.co.uk"]social@aviva.co.uk[/EMAIL] so we can pick it up if I am out of the office. We can then look into this for you and get you the answers you need. In your email can you please include your full name, date of birth, post code and any policy numbers you may have and hopefully we can get this all sorted for you soon.

Kind Regards

Dave

Jaybee101

Dunstonh,

Thanks so much for the quick reply! Yes it's a bit confusing looking back at the various literature I've received.

Dave,

Thank you, that would be great. I will forward details to you as you have instructed. Many thanks!

Jaybee101

Updating the thread with the outcome. Thanks due to Dave from AVIVA for getting me such a speedy reply however it's not the one I hoped for.... read on!

Aviva stated the following in reply to my query about the loss of the MEP:

[FONT=&quot]Thank you for your e-mail dated 10 May 2012 regarding the Mortgage Endowment Promise.[/FONT]

[FONT=&quot]The Mortgage Endowment Promise to policyholders applies to unitised mortgage endowments providing the plans were invested 100% in our With-Profit Fund at the time of our promise mailing or took advantage of our offer to switch to this fund by the closing date. They must also stay in this fund to maturity.[/FONT]

[FONT=&quot]You requested a fund switch on 10 February 2006 which was finally effected on 17 September 2007 re-allocating your investment to a number of different funds (copies will be sent by post). The reallocation meant that your policies were no longer [FONT=&quot]100[/FONT] % invested in the With-Profit fund therefore your policies were no longer eligible to benefit from the Mortgage Endowment Promise. [/FONT]

[FONT=&quot]The change of company name from Norwich Union to Aviva has had no effect on the conditions of the promise. [/FONT]

[SIZE=-1]I'm not so happy (as you'd expect) with the outcome. I had no idea we would lose any "Policyholder Promise/MEP" by switching funds to try and improve our lot. I'd call this disingenuous by the then NU.

The fund switch took two attempts (as NU just didn't action the first one at all depsite all forms arriving OK) and so the funds were reallocated by our IFA (of ten years standing so we knew him and he knew us) for a second time. He looked at our policies and units in accordance with NU's "best do something as this isn't going to pay out" etc. letters and nominated a number of funds to switch from & to in order to maximise performance.

He never advised us that this would invalidate the MEP nor were we made aware of it ourselves. Given that our MEP figure was being quoted at close to £12k you'd expect a big "RED ALERT" style warning to accompany the switch forms but there wasn't anything I recall... and I'd certainly recall potentially losing £12k.

Obviously, had anyone said "You realise by switching funds you'll lose the £12k MEP" I'd not have done it, nor would our IFA who was switching funds to make the performance better not worse.

Our policies haven't exactly run smoothly at NU (the eventual fund switch caused us to somehow drop out of their system so we were paying in but NU never bought units for months. Then they wrote out of the blue and told us we were in arrears.... then we had to pay by cheque for 18 months because the computer wouldn't take us back on. This all ended in a Financial Ombudsman case where we at last got it straightened out and the units reinstated at the price they would have been had they been bought at the correct time, end to end about two years of aggravation.

So forgive me for being a little sceptical that any warning whatsoever was ever given. I remember being told it was easy to switch funds, nobody even mentioned the Policyholder Promise / MEP then else I'd have remembered it. I've only recently become aware that one ever applied to our policies which prompted the initial post here and then the AVIVA enquiry. [/SIZE]

Of course, as in my initial post, the AVIVA letters now state that the MEP isn't payable because "The promise does not apply to this policy as there was no projected shortfall on the 6% projection when the Promise was calculated on 31st December 1999"; it makes no mention of the fact we apparently hosed up to £12k purely by switching funds. So which is it really?

So the moral of this story is "Don't whatever you do use a qualified IFA to switch funds else you'll lose your MEP". I'm sure many would have done this given the panic over endowments at the time. If you did.... wave goodbye to your MEP

This is where I/all of us that thought we were doing the right thing for our policies need a good lawyer....

dunstonh

I'm not so happy (as you'd expect) with the outcome. I had no idea we would lose any "Policyholder Promise/MEP" by switching funds to try and improve our lot. I'd call this disingenuous by the then NU.

The guarantees in place specifically applied to the WP fund. It is not an uncommon arrangement (pensions with guaranteed annuity rates often only apply it to the WP fund for example).

So the moral of this story is "Don't whatever you do use a qualified IFA to switch funds else you'll lose your MEP". I'm sure many would have done this given the panic over endowments at the time. If you did.... wave goodbye to your MEP

That isnt fair on the majority of us that would have checked first.

Also, as it was on the advice of the IFA, you now have grounds for complaint. Something you would not have had if you DIY.

Jaybee101

Sorry that obviously didn't translate well! Not blaming the IFA *at all*, I trust him with all my affairs and he's handled them very well for many years.

My point is that if *he* didn't pick it up (why should he if there is nothing in the paperwork to suggest there is the penalty of losing the MEP) then its unlikely others would too.. especially the man on the street.

Whether IFA based or DIY it's now clear hat any fund swapping invalidates the MEP. Still think this is not explained fully enough *if at all*.

Nobody in their right mind would throw away the MEP for the sake of switching funds. My complaint won't be against my IFA, it will be against the lack of clarity over the potential loss of the MEP provided by NU at the time of the fund switch.

dunstonh

It's funny how a text can read differently without the right emphasis.

My point is that if *he* didn't pick it up (why should he if there is nothing in the paperwork to suggest there is the penalty of losing the MEP) then its unlikely others would too.. especially the man on the street.

I do have some sympathy with him as he wouldnt known this unless he had experience of them. Aviva dont go out of their way to let people know.

Jaybee101

Yes, exactly! This was way before AVIVA, it was 2006/7 under NU. I can't find any info that I was sent to tell me I would lose the MEP by switching funds. As I've said, didn't even realise what the MEP *was* until a few days ago when revisiting paperwork from 2001(ish)!

Already both sides of AVIVA seem to be giving different stories. The paperwork I receive with the 'Red Alert' stuff says I dont qualify because of the valuation at 31/12/99 *but* the latest communication blames the fund switch.

Excuse me for being sceptical but I will get to the bottom of this. I've taken NU to the Financial Ombudsman once before to sort out their mistakes and I'll happily do it again if needs be.

Thanks for the help...

opinions4u

Excuse me for being sceptical but I will get to the bottom of this. I've taken NU to the Financial Ombudsman once before to sort out their mistakes and I'll happily do it again if needs be.

But will you complain to the IFA who advised you to do this?

freem17

I used to work for Aviva in the Endowment Shortfall team for some years (no longer). Its certainly correct that if you didn't have a shortfall on 31/12/1999 then you don't qualify for the MEP. If you did the conditions issued at the time the MEP was provided and with subsequent statements clearly stated you had to remain 100% invested in the WP fund to continue to qualify. There are no red flags which pop up if someone if about to do a fund switch to say no don't you will lose the mep as obviously we can't pursuede someone not to switch (That could be seen as advice - that's what your IFA is there for) and its already outlined in the conditions.