Aviva Endowment shortfall

chilmark

Having been forced by the Nationwide to take out an endowment mortgage in July 1987 (They would only agree to a mortgage if I took out an endowment they would not allow me to have the repayment mortgage I wanted) I have just received a policy maturity latter from Aviva quoting a £17975.86 shortfall on a £44,000 endowment, the question is, it was blatant mis selling by the Nationwide, they as with many others quoted 3 varying maturity figures, mainly showing the ability to repay your mortgage before the 25 years or have excess funds left on maturity. None as I remember ever quoted the possibility of a £17975.86 shortfall, yes I know they cover their bum by saying "investments can go down as well as up". Having taken the mortgage out in July 1987 I am told there is little the FSA can do as it wasn't formed until 1988, I have written to the Nationwide to see what they would do since it was them who mis sold the endowment and they claim the policy was now "Time barred" in other words they told me in writing that the endowment would be unlikely to repay the £44,000 therefor basically it's tough luck mate. Now Aviva had written to me telling me that they would look to cover under their "promise" the shortfall providing they had sufficient funds, so at the time the shortfall I thought would be covered, however the promise has only covered just £5400 of the nearly £18K shortfall, in between times I guess the investment bankers handling the funds have no doubt been creaming of lovely bonuses for handing mine and others under performing endowment funds.
Question is, is there anything I can do as the Nationwide now just shrug their shoulders, I guess they had their commission ages ago so why should they care what they mis sold
HELP!!!!!

kingstreet

What, if any, action did you take when you received a "red" warning letter explaining the plan was not on target to reach its goal?

It is this letter which triggers the time barring process.

dunstonh

the question is, it was blatant mis selling by the Nationwide

Regulation didnt start until 1988. You bought in 1987. So, it probably want mis-sold using the rules at the time.

None as I remember ever quoted the possibility of a £17975.86 shortfall, yes I know they cover their bum by saying "investments can go down as well as up".

There was also a warning that it may not hit target in the list of warnings.

I have written to the Nationwide to see what they would do since it was them who mis sold the endowment and they claim the policy was now "Time barred" in other words they told me in writing that the endowment would be unlikely to repay the £44,000 therefor basically it's tough luck mate.

Most people were timebarred around 2007-2009. Thats about 7-9 years after the endowment issue started. You were warned about this time bar and your timebar date. That was your time to complain if you had a complaint.

Now Aviva had written to me telling me that they would look to cover under their "promise" the shortfall providing they had sufficient funds, so at the time the shortfall I thought would be covered, however the promise has only covered just £5400 of the nearly £18K shortfall

The endowment promise was to cover up to the amount of your shortfall as it was around 2001-2. Not what it may letter turn out being.

I guess the investment bankers handling the funds have no doubt been creaming of lovely bonuses for handing mine and others under performing endowment funds.

Unlikely. Generally the performance of aviva investments is benchmark. No more, no less. So, they dont tend to underperform or over perform. You get whatever the investments return whether good or bad.

Question is, is there anything I can do

No. You missed your boat on that.

chilmark

dunstonh wrote: »

Unlikely. Generally the performance of aviva investments is benchmark. No more, no less. So, they dont tend to underperform or over perform. You get whatever the investments return whether good or bad.


If Aviva investments don't underperform or over perform why then is there a huge shortfall? I call that underperformance, the time barring is a joke, if you mis sold something which has a life of 25 years and you are still paying for it until the very end, surely it is in effect a credit agreement, you should therefor be covered until the end, luckily for many financial advisers it was just enough time to go bust and take the ill gotten gains with them, most are no better than estate agents..

dunstonh

If Aviva investments don't underperform or over perform why then is there a huge shortfall?

The dot.com crash was the big killer. The five years that followed were much better but just as endowments were getting back on track again, the global recession hit.

I call that underperformance

It underperformed what it needed to do to hit target. However, Aviva's investment funds in general match benchmark. The targets in the 80s reflected returns achieved in the 50s,60s and 70s. Indeed big surpluses continued to be paid right into the late 90s. The move to a low inflation economy with an extended boom created by cheap and available credit followed by two major crashes, the scale of which you rarely see one in a generation, let alone 2 in 10 years was the real problem. The failed to predict such a period.

the time barring is a joke, if you mis sold something which has a life of 25 years and you are still paying for it until the very end, surely it is in effect a credit agreement, you should therefor be covered until the end,

1 - it is not a credit agreement
2 - in law in all areas except financial services you get a 15 year timebar. So, the law had you timebared in 2002. Well before the FSA endowment timebar kicked in.
3 - With FSA regulation, you get a more generous timebar as you were told in writing that you had three years to complain from first being notified of a high risk of a shortfall. You were reminded of this date several times to allow you to make your complaint in good time.

You didnt complain suggesting you had no issue with it.

luckily for many financial advisers it was just enough time to go bust and take the ill gotten gains with them

Evidence?

most are no better than estate agents..

Back in the 80s, there were over 100,000 insurance agents and financial advisers. How have you managed to meet most of those 100,000 to form that opinion?

holly_hobby

There are a couple of issues I don't feel comfortable with here.

You say Nationwide BS FORCED you to effect an interest only mortgage, with an endowment policy as a repayment vehicle.

YOU say despite your request and requirement of a capital and interest repayment mortgage, was essentially barred by Nationwide themselves, with they only agreeing to lend to you on an interest only basis. Whilst I don't doubt your memory suggests this was the situation, I would find it on balance very unlikely to have occurred.

However, lets discuss your recollections ... Duns. has covered most areas I would expand upon, the fact that this policy was sold pre regulation (which came into effect in 1988), whilst mortgage advice was not regulated until 2004.

Being sold pre-regualtion, essentially means that the adviser/salesperson, was not required to assess the suitability of the product, alongside the clients risk profile and financial profile.

However, neither could they make mis-leading statements i.e this policy is guaranteed to repay the target sum (of which you have admitted in your post, you were fully aware that the policy was not gted, and neither were you provided with a written gte).

However, we know that revised EMVs and red letters commenced over 10 yrs ago, and as Duns. has stated (despite this being a pre-A day sale of which some Firms choose not to review), your letters would have clearly advised you of what you should do if believed the policy to be unsuitable to you.

The one glaring aspect of this that sticks out to me, is the fact that although you were clearly market aware, regarding the various mortgage repayment methods available, even entering your mortgage appointment in full mind of effecting an C&I mge - you instead elected to effect an endowment mortgage with Nationwide Anglia (as was) BS, of which some yrs later, you became unhappy, primarily from what I can see from the performance of the policy (LCE).

What I find a little baffling is if so determined for a C&I in 1987, and now blaming Nationwide of an endowment mge mis-sale, why at the time you did not choose to seek a mortgage elsewhere ?

As this fact alone encourages me to assume that the arrangement selected, was both perfectly suitable and acceptable to you at the time, otherwise as I say, I would have expected you to have rejected their mortgage offer and duly arranged the favoured repayment mortgage with an alternative provider (Nwide having one of the lowest market rates, not being a strong or suitable enough reason to have accepted an (alleged) dictated I/O method over C&I, when it was clear this was not your wish)

Notwithstanding this, as discussed by Duns. I can also confirm that the policy complaint is correctly time barred.

Hope this helps .. if not exactly what you wished to hear.

Holly

chilmark

OK lets be clear about my original conversations with the manager of what was Nationwide Anglia at the time (please bear in mind it was 25 years ago) I already had at the time a smaller Repayment Mortgage on a one bedroomed property, when I looking at a new home I was told the would be no problem in borrowing the extra funds as I had sold my first house and although relatively new in to a job I was earning sufficient money to warrant the mortgage, so offered on a another rarely available at the time home. Naturally I was young and naive matched with the fact I didn't want to loose either the sale or the purchase, when the paperwork was put forward the manager rang me at work and asked for a meeting in his office, in the meeting he explained he couldn't accept the application however if I were to re-apply for an endowment policy mortgage things may change, going through the figures which at the time looked fairly impressive and being told that the mortgage may be paid off as early as 20 years or indeed I would end up with a large surplus (at no time did he ever quote a shortfall of 40%) there were plenty of verbal it will definitely repay your mortgage, but naturally I can't prove it..naturally because of the figures flirted around at the time it was a no brainer. My argument is, was it sold in my best interest?, surely if I was credit worthy for an endowment I was credit worthy for a repayment, so why was I not allowed to have the mortgage I wanted in the first place. In my view sheer greed from the manager and Nationwide Anglia they both earn commission so why agree to a repayment mortgage.
Yes I was sent shortfall warnings but by the same token also sent letters stating about the Norwich Union shortfall promise, and where as you guys who work within the industry may know better, I didn't.
Yes I could have gone elsewhere but as many people will agree to you normally go with your current provider as it doesn't look good if you start applying for mortgages around the market, bells start ringing especially if you have been turned down by your current lender, to double prove my point when negotiating with the estate agent their own financial advisor said he could deal with the Nationwide mortgage and endowment application to keep it all under one roof, the Nationwide branch suddenly changed their maine and rejected the application, how ever said they would reinstate the acceptance if I dealt with them direct, which tells me they weren't happy loosing their endowment commission to the estate agents financial advisor.. It all stinks of greed... but naturally I would imagine the Nationwide would have no records of such conversations 25 year on.

Yes naturally I am a little !!!!ed at loosing £18K who wouldn't be?

In terms of my statement re financial advisers on 5 separate occasions now my parents who have seeked advice on investment after receiving money from inheritance etc have been given bad advice and to date lost in the region of £30,000 over a 15 year period on various investments, most advice has been given by the Natwest financial advisor as my father has always banked with them and for some reason he will not heed my advice to invest in property, which would have seen a 3 fold increase in value, in my opinion and maybe it is only my opinion financial advisors in my experience sell what earns them the most commission and not what is best for the client, I am sure there are exceptions, but not many!!

bevmk127

i gree with a lot of what you have said chilmark took our endowment out in 1991,again was told this is the only mortgage could have endowment not repayment as earnings to low, we were also assured that we would have a payed off mortgage in 25 yrs and x amount over as a with profits endowment.. what a load of rubbish they fob you off with .we are as you have a shortfall. luckily we have made over payments when we could afford to. to take the amount down they also send literature saying about taking another endowment policy to cover the shortfall no chance. we did appeal but lost.

dunstonh

My argument is, was it sold in my best interest?,

At the time they had no reason to think either option was better than the other. For decades endowments had paid surpluses and you even had people complaining back then that they should have taken out an endowment. They were two valid options with both having pros and cons.

surely if I was credit worthy for an endowment I was credit worthy for a repayment, so why was I not allowed to have the mortgage I wanted in the first place.

Yes. There is no logic in what you were told. However, even if you were not timebarred or pre-regulation, it is just a verbal allegation about something said 25 years ago.

which tells me they weren't happy loosing their endowment commission to the estate agents financial advisor.

Nationwide wouldnt have a clue about the commission as it would have long stopped going to the branch. Plus, renewal commission on endowments is about 25p a month.

In terms of my statement re financial advisers on 5 separate occasions now my parents who have seeked advice on investment after receiving money from inheritance etc have been given bad advice and to date lost in the region of £30,000 over a 15 year period on various investments, most advice has been given by the Natwest financial advisor as my father has always banked with them and for some reason he will not heed my advice to invest in property, which would have seen a 3 fold increase in value, in my opinion and maybe it is only my opinion financial advisors in my experience sell what earns them the most commission and not what is best for the client, I am sure there are exceptions, but not many!!

These are sales reps/insurance agents. Not real financial advisers. You should never go to banks for advice. They are limited to their own products or a tie in with a limited panel of products which are typically low quality and expensive. Also, for reference, I have never known anyone lose money over 15 years on investments. That nearly matches my personal history of investing and i have got on average 13% a year. If you lost money then you must have being going in high and coming out low rather than riding through it.

For reference, IFAs account for 1% of complaints at the FOS. So, your view that there are not many good ones does not fit the reality. The problem is that you are looking at insurance agents and sales reps.

holly_hobby

Hi again,

I sympathise with your situation, and your recollections of what took place 25 yrs ago, so please do take any difference of opinion as my being dismissive of your issues.

As stated your policy was sold pre-regulation (A Day) - so the situation re suitability as discussed ealier (ie the risk profile of the contract suiting your attitude to risk), is sadly a mute point.

Furthermore you haven't actually lost 18k, as the target sum was a estimated maturity value as the illustration and policy documentation would have clearly documented - and you can not be compensated for loss of expectation - even if this was sold post A day, and not time barred. (indeed at that point all matured policies had do so with a surplus, so you can't really blame them for not forseeing a downturn in the economy & future shortfalls to target on low cost endowments)

You have said you elected to effect an endowment mortgage, and not to exercise your right to seek an alternative provider, despite you say Nwide pressing you into a corner for an endowment mge, as you were inexperienced (although it is noted you were not a FTB), but felt wary of going to an alternative lender, as they may not look favourably on your application being "turned down" by your current lender. As I say, I can't dispute this occurred, but do find it a little unusual for a BS branch manager.

But your reason for remaining with NWide (ie fear of rejection by others, due to NWide rejecting you), is contradicted by your statement that you HAD been offered a mortgage with Nationwide - (albeit you state solely offered on an endowment mge basis), so rejecting NWides offer, and instead applying to an alternative lender on a C&I basis would not have been affected by any rejected application, as the facts are it wasn't rejected ie. you had been offered a mge with Nwide.

So from a complaint review position, the reasons you have given for accepting Nationwides mge offer, don't in my opinion have any merit or substance - notwithstanding the fact that mortgage advice was not regulated until some years later in 2004.

Its unfortunate that your policy has not performed to target, and the providers promise not sufficient for your wishes, but there is little benefit to be spent in raking over this.

With regards to investment an estate planning advice, you are always best placed to engage with an IFA, whom is suitably qualified in the areas of advice reqd.

Hope this helps

Holly

Holly

magpiecottage

dunstonh wrote: »

The dot.com crash was the big killer. The five years that followed were much better but just as endowments were getting back on track again, the global recession hit.

There was also the little matter of With Profits funds moving out of equities (shares) and into cash just when the smart money was going the other way.

This was not the fault of the insurance companies - they were forced to do it by the FSA.

holly_hobby wrote: »

You say Nationwide BS FORCED you to effect an interest only mortgage, with an endowment policy as a repayment vehicle.

YOU say despite your request and requirement of a capital and interest repayment mortgage, was essentially barred by Nationwide themselves, with they only agreeing to lend to you on an interest only basis. Whilst I don't doubt your memory suggests this was the situation, I would find it on balance very unlikely to have occurred.

Being rather long in the tooth these days, I remember that DID happen. Lenders in 1987 frequently insisted that you took out an endowment - and they received the commission on it - if they were to grant you a mortgage.

What I find a little baffling is if so determined for a C&I in 1987, and now blaming Nationwide of an endowment mge mis-sale, why at the time you did not choose to seek a mortgage elsewhere ?

The problem was all the building societies were doing it at the time. (Remember in those days people did not look to the bank for a mortgage in most cases.)

However, they were allowed to.