Aviva Endowment Compensation Refused!

holly_hobby

I, and FOS, don't generally accept the ATR on the fact find as accurate - but will make an independent evaluation as to what is felt as an accurate representation of the clients ATR (if investigating the mis-sale of a policy re suitablilty). So don't worry about the ATR recoreded, that can be challenged and effectively ignore.

My evaluation of this, is that although you were not a FTB, your existing mge at the time of sale was on a repayment basis, you also state you made it known (and it is recorded) that you wished to Repay & Protect your mortgage - which suggest the suitability of a C&I mge, as a Low Cost Endowment DOES not guarantee to repay the loan on maturity, although it will offer life protection of the target sum throughout the duration of the policy.

Further to which, if you also held no existing risk based investments such as PEPs (now replaced by Unit Trust ISAs), or other medium risk based saving plans, then that, along with your existing repayment mge at the POS, and noted statement, does not indicate a cautious or indeed balanced investor - rather risk adverse (as even a cautious ATR may be suitable for a With Profits Endowment.

Futhermore, IF there were also no mitigating statements in the Suitability or Reason Why Letter, to demonstrate that you were made aware of, and accepted the associated contract risks, OR that you wished to effect an endowment mortgage due to lower monthly costings (which would be a mitigating factor supporting the sale), then what you have told me is most definately an uphold, and FOS should agree on this based on the info you have provided.

If this is not time barred, and you have recd the final response of the Firm - refer it to FOS, whereby you issue is that you were a risk adverse client, supported by the fact you already held a C&I mge, your recorded statement that you wished to "repay and protect" your mortgage, (also inc that you held no risk based investments if thats accurate). You want to build the picture, that if aware of the risks, you would not have purchased the endowment policy and would have on C&I mge (which I am presuming was affordable to you, and that cost was NOT the reason why you changed from C&I to an I/O mge).

Here is a direct link to FOS and their guide to "how to complain" - http://www.financial-ombudsman.org.uk/consumer/complaints.htm#3

Be aware that if upheld, the compensation will be the difference in cost between the I/O mortgage & endowment SV, and a capital & interest repayment mortgage, over which the endowment policy was used as a mortgage repayment vehicle - which in some cases equates to a low figure, or even nil (where there has actually been a financial gain over the period with the endowment method).

Hope this helps

Holly

holly_hobby

... b*gger .. after all that typing .. OP has come back ... having found the FF - and CU are royally covered, inc the documented risk disclaimer in their "important points" .... and using the terms "designed" to build up a sum (repay the mge), which only means in the FS world "thats the aim" i.e no gtes provided.

So sorry OP ... ignore all my earlier post .... FOS won't entertain this on reading what you've now put up ... and indeed I would defend if I were consulting for Aviva.

Sorry .... I know not what you want to hear ..

Holly xx

sobie

davenport151 wrote: »

Interestingly Sobie you are in a similar situation to us.
Endowment took out in 1995 - due to mature in 2020. Our payments are fixed yearly as we also like to know where we are.

Currently difference in mortgage/endowment is £19,000. Is the figure quoted (the £28,000) the current value? Ours is currently worth £19,000 so this still has room to grow (I hope). Projection value at present £34,600 (at 4%).. Unfortunately ours is unit linked so no bonus or promise.

how odd! what a mess hey. Are you/ have you complained? what was the verdict if so. are you overpaying your interest payments? Is it Aviva/ CUG/ NU?

Can't believe I haven't mentioned this! current projected for us is £25,200.00 at 4% (4% on an Aviva endowment :rotfl:)

the £28,000 I mentioned was the £17.000 which is the current guarenteed amount to be paid (which is less than last year) plus the £3000 bonus & £8000 promise.

investments have to grow by 8% for us to achieve £33,000 (which was the 5% target on taking the mortgage out). Plus we get the £8,450 promise so if investments grow at 4% :rotfl: then we will be left to pay £8,000 - which we should be able to achieve with our overpayments of interest.

Problem Is I don't trust or believe their "Projections" anymore considoring they haven't got a single year right yet (its just got less & less)! which is why I keep looking to the £17,000 guarenteed minimum sum. (thinking of worst case senario).

dunstonh

Problem Is I don't trust or believe their "Projections" anymore considoring they haven't got a single year right yet (its just got less & less)!

Projections are believable as they are factual. If you get x% p.a. until maturity then that is what you will get. They are not predictions though. They are just examples.

Whilst you would expect a decline over the last 12 months given the markets, the years before that should have seen increases. The start of the credit crunch should have seen major losses as we had massive drops. The five years prior to that almost saw the endowments getting back on track again after the dot.com crash. Returns are never straight forward or straight line. They zig zag and we have had a bad 10 years.

sobie

holly_hobby wrote: »

... b*gger .. after all that typing .. OP has come back ... having found the FF - and CU are royally covered, inc the documented risk disclaimer in their "important points" .... and using the terms "designed" to build up a sum (repay the mge), which only means in the FS world "thats the aim" i.e no gtes provided.

So sorry OP ... ignore all my earlier post .... FOS won't entertain this on reading what you've now put up ... and indeed I would defend if I were consulting for Aviva.

Sorry .... I know not what you want to hear ..

Holly xx

Thank you, that was a really clear post and Im sure it will be helpful to many other people. I just really want to know where we stand so we can prepare for the worse.

So the fact that "Repayment mortgages" are not discussed (as suitable or otherwise) would not be held in our favour?
The way i see it:
1) we didn't want any risk at all. (hense we had a repayment mortgage first)
2) we were not offered a repayment mortgage. (even though we were aware of repayment mortgage as we already had one). Or were we?
3) low cost endowment was "cheaper" v's all other interest only mortages? or do any of those terms In the summary mean Repayment mortgage?

Im not disagreeing with the fact that we were informed that the endowment might not repay our mortgage - and to my belief shortfall/ performance is not a valid reason for complaint. (for any mis-sold complaint). although in reality would anyone complain that didn't have a shortfall? If this was meeting my "needs" there would be no complaint.

The conclusion to the complaint was:
(salesman) took your curcumstances and objectives fully into account in the advice as you confirmed at the time that you were prepared to accept a degree of risk my view is the endowment policy was a suitable recommendation for you.

sobie

dunstonh wrote: »

Projections are believable as they are factual. If you get x% p.a. until maturity then that is what you will get. They are not predictions though. They are just examples.

Whilst you would expect a decline over the last 12 months given the markets, the years before that should have seen increases. The start of the credit crunch should have seen major losses as we had massive drops. The five years prior to that almost saw the endowments getting back on track again after the dot.com crash. Returns are never straight forward or straight line. They zig zag and we have had a bad 10 years.

1998: (just before starting)
5% £33,000 7.5% £47,000 10% £59,000
2000:
4% £28,500 6% £36,200* 8% £49,500
2005:
4%£27,500 6% £35,300 8% £45,100
2008:
4% £29,200 6% £37,000 8% £46,400
2010:
4% £27,800 6% £34,100 8% £41,600
2012:
4% £25,200 6% £29,200 8% £33,900
(*promise amount)

So yes improved a bit in 2008 (to the best level we had) but soon dropped lower than ever!

holly_hobby

Well, in essence this is how it will be seen by any reviewer...

1. you entered the appointment, not as a FTB and already held a C&I mge - which demonstrates that you were aware that the was an alternative mge repayment method to the interest only option.

2. The summary of the sale/ effectively the RWL - clearly says (copied from your earlier post) .. "after considoring the different methods of repaying the loan, they have decided this on an interest only basis. Which suggests that both C&I and IO were discussed, with you electing to effect a IO mge

3. The CR covered his wotsits with the statements regarding the the instruction to lapse the existing mortgage protecton. (which would have been a decreasing term assurance/DTA contract)

4. He goes onto say that having selected an IO mge, you wanted a policy that would repay and protect you. To which the most suitable to your risk profile (and indeed the lowest risk Low Cost Endowment (LCE) offered by CU, was a Homemaker plan - so again he has identified a suitable plan offered by the Firm, and justifited its suitability and sale.

5. He further underpins his recommendation by stating that although there are alternative mge repayment vehicles that may be utilised for an interest only mge - such as PEP, Pension with Pension Term Assurance, full endowment etc - these methods were discounted due to higher costs and/or risk profiles. So again this justifies the sale of a WP LCE as the lowest risk and most cost effective policy for the given requirements.

6. And finally ..... the cherry on the cake ... "you should be aware that the returns from this plan will depend on investment performance and the amount you get back is not therefore guaranteed to repay your mortgage in full" ... which means you're nailed on trying to argue that the policy was not suitable to you, or that you were unaware of the associated risks (which is the issue underpinning any proven investment policy mis-sale).

So chuck, we are IMHO snookered, as the CU POS docs, which have been presented (and which would also be furnished to FOS in their final review), clearly supports both the suitability of the mge repayment method and that the policy selected for purchase and its risk profile, were adquately explained in order for you to make a balanced and informed decision as to their suitability.

Again, based on what I have read from the suitability section of the FF, I can't see any data that would support the claim of an unsuitable sale.

I am sorry, and realise that this will be very disappointing to you, and do believe that any referral to FOS, will be cited by Aviva as frivilous and vexatious, and will result in another rejection ...

Best to put your mojo into dealing with the projected shortfall .. (which may not be as great as forecast when the policy does mature ... as EMVs are based on industry prescribed FSA rates ... where the reality of acutal returns can be somewhat different .... which means yes it could be lower than presently forecast .... or on the brighter side, somewhat more ..we can life in hope !)

It may be an idea to switch at least the current estimated shortfall to C&I (if not already done), to try and mitigate the impact of the maturing policy, and then anything else is a bonus ... or a new pair of lovely Jimmy Choo's .. !!

Hope this helps .. I wish you well

Holly xx

dunstonh

So yes improved a bit in 2008 (to the best level we had) but soon dropped lower than ever!

Credit crunch and global recession. Outside the control of Aviva. For reference, I am not trying to justify anything but just explain it. Also, check those rates used for 2012. The ones I have seen havent used 4,6 & 8% like previous years. They were using lower projections example rates.

davenport151

sobie wrote: »

how odd! what a mess hey. Are you/ have you complained? what was the verdict if so. are you overpaying your interest payments? Is it Aviva/ CUG/ NU?

Interesting to compare Sobie. Ours is was originally Woolwich Life Low Cost Endownment, then Barclays Life now Reassure. Unfortunately by the time we got money savvy enough to complain we were timebarred. Similar to you I do not think the attitude to risk was explained enough to us. They were made to look a cheaper option with a sum left over. What probably helped us the most was the first few years as I believe the growth was quite high for the first few years.
We have left the endowment as is and keep deliberating as to whether to cash in. We are overpaying the mortgage slightly and keeping an eye on both so hoping things will level off.
I know that people are saying that is the thing now. Where we have lost out on the endowment (apart from the life cover) we have gained on the mortgage payments.

sobie

holly_hobby wrote: »

Well, in essence this is how it will be seen by any reviewer...

1. you entered the appointment, not as a FTB and already held a C&I mge - which demonstrates that you were aware that the was an alternative mge repayment method to the interest only option.

2. The summary of the sale/ effectively the RWL - clearly says (copied from your earlier post) .. "after considoring the different methods of repaying the loan, they have decided this on an interest only basis. Which suggests that both C&I and IO were discussed, with you electing to effect a IO mge

3. The CR covered his wotsits with the statements regarding the the instruction to lapse the existing mortgage protecton. (which would have been a decreasing term assurance/DTA contract)

4. He goes onto say that having selected an IO mge, you wanted a policy that would repay and protect you. To which the most suitable to your risk profile (and indeed the lowest risk Low Cost Endowment (LCE) offered by CU, was a Homemaker plan - so again he has identified a suitable plan offered by the Firm, and justifited its suitability and sale.

5. He further underpins his recommendation by stating that although there are alternative mge repayment vehicles that may be utilised for an interest only mge - such as PEP, Pension with Pension Term Assurance, full endowment etc - these methods were discounted due to higher costs and/or risk profiles. So again this justifies the sale of a WP LCE as the lowest risk and most cost effective policy for the given requirements.

6. And finally ..... the cherry on the cake ... "you should be aware that the returns from this plan will depend on investment performance and the amount you get back is not therefore guaranteed to repay your mortgage in full" ... which means you're nailed on trying to argue that the policy was not suitable to you, or that you were unaware of the associated risks (which is the issue underpinning any proven investment policy mis-sale).

So chuck, we are IMHO snookered, as the CU POS docs, which have been presented (and which would also be furnished to FOS in their final review), clearly supports both the suitability of the mge repayment method and that the policy selected for purchase and its risk profile, were adquately explained in order for you to make a balanced and informed decision as to their suitability.

Again, based on what I have read from the suitability section of the FF, I can't see any data that would support the claim of an unsuitable sale.

I am sorry, and realise that this will be very disappointing to you, and do believe that any referral to FOS, will be cited by Aviva as frivilous and vexatious, and will result in another rejection ...

Best to put your mojo into dealing with the projected shortfall .. (which may not be as great as forecast when the policy does mature ... as EMVs are based on industry prescribed FSA rates ... where the reality of acutal returns can be somewhat different .... which means yes it could be lower than presently forecast .... or on the brighter side, somewhat more ..we can life in hope !)

It may be an idea to switch at least the current estimated shortfall to C&I (if not already done), to try and mitigate the impact of the maturing policy, and then anything else is a bonus ... or a new pair of lovely Jimmy Choo's .. !!

Hope this helps .. I wish you well

Holly xx

Thank you so much for your very informative thread Holly. you've writen in a very clear and easy to understand way and you didn't have to help so thank you again.

I can totally understand the situation we are in more clearly now, and wished that Aviva had bothered to explain in such a clear and presise manor that I could understand.

I don't understand why it took Aviva 14 weeks to reach their verdit, it seems to be a very clear cut case from the way you have explained it to me.

The Lady at Aviva did explain that with 11 years to go, the future could be better than anticipated, and at the same time could be worse, but not worse than the guarenteed amount, plus bonus & promise amount, so the £19,000 shortfall would be an worst case senerio.

We are currently overpaying our interest payments by £100 pm. the interest rate is currently fixed at 4.1% for 5 years and we are not allowed to pay back any more than 10% each year. so is this overpayment enough? Or would we be better off switching to part repayment?

Thanks for everyones advice and comments, i can see things a lot clearer this morning after the shock of rejection has sunk in.