Mis Sold Endowment/Mortgage Query

hannhol

Hello - apologies if I am posting in the wrong place, but I hope someone can help.

I answered the phone last night for my mum, who couldn't take the call, but it turned out to have been a "nice lady" called Emma who was going to help my mum claim for a mis-sold endowment mortgage. After reacting in horror I told my mum she must absolutely not engage any company to do that for her, and I would help her fill in the forms (having recently reclaimed myself for mis-sold PPI through the support of this forum, I don't claim in anyway to be an expert, I jsut know you can do it on your own).

My question is is it too late, is it worth her claiming? She was sold the mortgage with my dad in 1983 and I believe pays the mortgage off in 2015. In the late 1990s she had to cash in some endowments when her marriage to my dad broke down. She received a letter from the Abbey as was a couple of years ago but had no idea that she could do anything other than be rather angry and bitterly disappointed that the endowments would not pay the mortgage off. I believe she was missold as she bought the endowments in good faith and never seemed to realise at all that they wouldn't do what they said at the time. I need to talk to her in more depth abuot the reasons for mis-selling before we take this foward.

Any thoughts/comments greatly appreciated, I don't want to get my mum's hopes up if it really is too late.

dunstonh

My question is is it too late, is it worth her claiming?

It is not claiming. That is what you do when you suffer a claimable event. It is complaining. Chances are it is too late. Most endowments are now timebarred from complaint.

She was sold the mortgage with my dad in 1983 and I believe pays the mortgage off in 2015.

Regulation didnt start until 1988. So, unless she bought it via an agent of the insurer, there is no-one to complain to (if she used a solicitor, accountant or what is now an IFA then its game over)

I believe she was missold as she bought the endowments in good faith and never seemed to realise at all that they wouldn't do what they said at the time.

And you were present at the meeting where it was sold?

a 1983 case shouldnt be too bad. It gets tax relief on the premiums and had enough good years to mean the shortfall shouldnt be too bad. So, when you consider the lower monthly cost of an endowment mortgage to repayment mortgage, even if there is a shortfall, she could still be better off.

The two big issues though are 1) its pre-regulation and 2) timebar

hannhol

Dunstonh, thanks for your prompt response. Sadly no I wasn't at the meeting, I was only 3 at the time! As I said in my original post whilst I believe on the brief conversation we had last night she was mis-sold, I need to have a talk with her in more depth to find out if she can/should take this "complaint" forward.

magpiecottage

I agree with DunstonH.

A 1983 sale is pre-regulation. That means unless whoever sold you for it was working directly for a firm that, at the time, subscribed to the Banking, Building Societies or Insurance Ombudsman Schemes, FOS has no jurisdiction.

Abbey Life did. However, even then You would need to prove either a misrepresentation (not merely poor advice) or a guarantee that it would pay out.

A misrepresentation would be a negligence claim and without FOS to intervene you would need to go to the courts. The adviser (if he or she is still alive) or the firm could then simply use Section 14B of the Limitation Act to timebar you.

A guarantee would amount to what is known as a collateral contract. If the person giving it was acting for the insurer, a court would probably find it legally binding.

If not then it is a bit like me promising that DunstonH will give you £1,000,000 in 33 years time - if you go to him and ask for the money he will say "nothing to do with me". My "promise" would a misrepresentation, not a collateral contract. I would have been negligent but because it was so long ago the court would not accept a claim against me either.

However, all is not lost.

The average price of a house now is about £227,000. In 1983 it would have been about £36,200.

My guess is that a family with a young child probably bought at considerably less than that and would have put down a deposit of at least 5%.

So my guess is that the mortgage would be no more than £30,000.

The endowment would have aimed to produce that amount and probably be on a With Profits basis, where "bonuses" were added annually to an initial guaranteed maturity payment (plus a percentage of existing bonuses). In 1983, bonuses were a relatively high and maintained that for about another ten years or more. No insurer had ever cut a bonus rate and it was a case of "who is going to blink first?".

Those bonuses cannot be taken away. The insurer might not add any more but it cannot take them away - provided premiums are kept up until the policy matures.

So if you look at the latest bonus statement and subtract both the "Guaranteed Basic Sum" (not the death benefit) and any bonuses already added from the death benefit, that will tell you the worst case scenario.

I suspect you will find that you are facing disappointment rather than disaster.

hannhol

Magpiecottage - thanks for your comprehensive answer. I'm not going to claim to understand it all, but I will show it to my mum and see what she says. Either way there is no 'disaster' she knows what she is paying now, and she knows when the mortgage will be paid off.

The main thing is, I want to make sure she is not getting involved with any complaints companies. If she still wants to put together a complaint, at the very least she will be doing it for free