Endowment update: payouts still falling

toonfish

Mr_helpful wrote: »

You seem to condone this selective memory and thickness (lying) just to claim compensation

there is certainly a lot of that going on nowadays

EdInvestor

What I am saying is that even the investors who thought they understood about the investment risk. have been exposed to much higher risks than they were told about at the point of sale.

The endowment disaster is not just a matter of ordinary market risk.

Mr_helpful

EdInvestor wrote: »

What I am saying is that even the investors who thought they understood about the investment risk. have been exposed to much higher risks than they were told about at the point of sale.

The endowment disaster is not just a matter of ordinary market risk.

This maybe true but that does not mean a salesman miss sold the policy.
Was I miss sold my house because the interest rates of the 80s were higher than expected or in the 90s negative equity came along or because mrs thatcher invented the poll tax.
Any one knows that there is always the unexpected. Any one with a brain should know that it has always been impossible to forcast exactly what you would get back in 25 yrs. The brochures and documentation were quite clear that you may get back less or more than predicted. The fact there are 3 illustrations (projections) should give someone an Idea of the risk especially when the usual one used for a mortgage was the middle one.
In reality I dont believe many policies were miss sold but you are encouraging people to have selective memory and lie about the sale so as to exploit loopholes in advisers record keeping. This brings you down to the level of the few people who genuinely did miss sell these endowments.
People falsly claiming as you advise have had a severe effect on the funds of companies and so have probably had an effect on the bonuses the companies have been able to pay to the existing endowment holders.

Ps I dont understand my computer was it miss sold.

EdInvestor

I agree, it's absolutely shocking that the policyholders have to pay the compensation when the company is guilty of misselling: yet another With-profits risk the salesmen don't tell you about.

Have you noticed the latest ploy?

Several are now saying they are planning to hand out "windfalls" from "orphan assets" - allegedly "spare" money hanging around in the WP fund which they claim has no owners.

Err, hello?

Of course we know who owns the money :the policyholders own 90% of it and the shareholders own 10%.That's been the case for years.

What they actually plan now to do is grab a bigger chunk of this policyholder money for the shareholders (including them of course).And they have the nerve to suggest they're doing the policyholders a favour with this idea. :mad:

You couldn't make it up.

Mr_helpful

EdInvestor wrote: »

I agree, it's absolutely shocking that the policyholders have to pay the compensation when the company is guilty of misselling: yet another With-profits risk the salesmen don't tell you about.

Yes and on another thread you advise someone that most claims are won by default because the seller hasnt kept records that are good enough for todays courts not because the policy was actually miss sold,
Most salesmen didnt know the risks of trusting their customers when they said they were happy with the cheapest form of mortgage.
Thanks to your claim culture mortgages have a heavey burden of regulation the payment of which is met by the consumer. A well as the returns to legitimate investors being paid out to support oportunistic calims. Nothing like shooting oneself in the foot is there.

mayb_2

Originally posted by MrHelpfull

"You say no one knew the risk and that they were taking an investment. Did no one read a Key facts document. The first page told them it was an investment and they could get back more or less.
You seem to condone this selective memory and thickness (lying) just to claim compensation"

This would be an opinion based on what experience exactly? I don't know how old you are but were you actually selling these endowments and with profits policies yourself? I am curious to know what exactly you and the others giving out this sort of opinion are basing it on.

Mr Helpfull what is a key facts document? I never saw one of those for either my mortgage endowment or my WP policy.Did any of them say you may get back nothing at all I wonder - I bet they would have been flying off the shelves then.

Read the FSA's articles - A search for With Profits Policies in their library section brings up some interesting reading. I attach a link to one here

http://www.fsa.gov.uk/pubs/other/fswith_profits.pdf

The following is a quote taken from that document which was published in 2005 - just two years ago.

"However, with-profits products have come in for criticism recently. Concerns,in particular, over the complexity and opacity of the products, and a lack of consumer understanding of the risks attached, have grown against the backdrop of a number of major problems in the life industry.
Their With Profits Review is quite informative too.

If the FSA have arrived at the opinion in 2005 (having started the review in 2001) that these policies were complicated and opaque why do you think that everyone understood what they were doing when they bought them in the late 1980s and early 1990's when people had far less access to information than they have now. Can't imagine there was a lot of surfing the net for information then.

I am of the opinion that a lot of the people selling them didn't really understand them either. They didn't need to - they had sold them for years and they had never failed so why worry how it happened - magic!

"Thanks to your claim culture mortgages have a heavey burden of regulation the payment of which is met by the consumer"

There is no cost that ever arises that is not met by the consumer. The cost of failed policies, the cost of setting up and administering these failed policies, the commission of the person who missold these policies - all met by the consumer. Funnily enough the only people who don't appear to lose out in this scenario are the people who advised you to buy these policies -commission safely in the bank!

You are quite happy to accuse people of lying to get compensation - I could accuse advisers of lying to get the sale. I wasn't present at each and every sale and neither were you or GG or dunstonh for that matter. The facts speak for themselves - many, many of the products were missold and if the company is too shoddy to keep proper paperwork they are more than likely to have been too shoddy to sell the product properly, with full disclosure and discussion of the facts.

It is not enough to shove a document under someone's nose and then declare that they had all the information they needed. It is also necessary to ensure that they fully understand what you are talking about - which is something else you can read about in the documents from the FSA. You can also educate yourself on the work done on the meeting of 'reasonable expectations' of the consumer as to the return on their policies. Something that hasn't really been addressed yet as far as WP policies are concerned.

EdInvestor

mayb wrote: »

.... a number of major problems in the life industry.

You're not kidding!The incompetence and recklessness of these companies knows no bounds. :mad:

Here's the latest, featuring the largest one, Norwich Union:

Lifestyling? Err, sorry, we forgot to do it

It's becoming more and more obvious that you'd have to stark raving bonkers to entrust your hard-earned to this shower.

Mr_helpful

Hi Maybe
I will unlike some other posters answer your queries from experience and hopefully without too much salesmans bias.
The finaial services industry works under regualtions that are imposed ultimatelt by the treasury The regulators names have hanged over the years but they still report to the treasury. In the main people will follow the rules. I started in 1991 with a company whose with profits fund was recommended by probably ever newspaper in the land namely the Pearl. Even in those days we had a fact find to see what the client wanted. We also geve quotes which conformed to LAUTRO specifications and a quote against a repayment mortgage. Over time the industry moved on and so did I to being an IFA specialising in mortgages.
I cant remember the date but sometime in the early 90' Key Features Documents were introduced. A 4 pge doc with on the first page the aims of the policy ie to build up a sum to pay off your mortgage and pay out a guaranteed sum in the event of your death. The risks ie you may get back more or less and your commitment ie you pay until maturity.
You could not get back nothing at all if you went to maturity because of the guaranteed sum assured.
If a policy did not run a set time usually about 4 yrs the salesman got a commission clawback so not entirely risk free for him either..
What people are really complaining about is the low cost with profits endowment largely introduced in 1971 by Royal life. In 1996 these were paying massive surplusses but they had grown over high periods of inflation. As inflation fell so did returns and coupled with a sustained fall that halved the stock market post 2000 we saw endowments in trouble from performance. This is what people are actually complaining about and unfortunately is not grounds for a miss sold policy. All investments are a risk and if you cashed an ISA in in say 2003 the return most likely would disappoint.
The smokescrene put up by Edinvestor over complexity of the product is laughable. Does she or many other people fully understand the energy management system of their car? Do you fully understand how you often dont get the performance or economy figurs claimed by the manufacturer? Steel quality was poor in the late 70s and cars rusted badly. Does this mean cars are mis sold because people dont understand either the car or the risk?
Computers are becoming ever more complicates as is windows does this mean Bill gates is the greatest miss seller of all time? Complexity is a pathetic excuse for claiming something is miss sold.
The genuine reason people bought endowments was in most cases was that the overall monthly cost was cheaper than a repayment. In fact some endowments came out cheaper than PEP?ISA plus life assurance.
People unfortunately are exploiting loophole as openly advised by Edinvestor to get back money when they should not to the detriment of other legitimate policyholders. I have not been on this forum that long but have seen ED advise virtually everyone to surrender an endowment and in many cases if people have followed her advice they will lose thousands.

Edinvestor
Your jibe at the incompetence of the industry may be true about NU but lifestyling means moving investment from equities to bonds etc and this according to you is the very thing that is hampering performance in the endowments so people should be grateful NU forgot or their pension would be even worse. You cant have it both ways.

defender_of_the_weak

not much time to cover everything but a few observations.

This is the same Pearl that undertook a review of sales from 1997-2001 due to the highlevels of churning and inappropriate advice.

Did the Standard life policyholders realise that a significant chunk of the with profits fund would be used to fund the costs of the pensions and more recently endowment reviews.

Financial services is still an industry where it is possible to advice on almost any form of policy or investment based on the qualification equivalent of a GCSE.

EdInvestor

Mr_helpful wrote: »

Your jibe at the incompetence of the industry may be true about NU but lifestyling means moving investment from equities to bonds etc and this according to you is the very thing that is hampering performance in the endowments so people should be grateful NU forgot or their pension would be even worse. You cant have it both ways.

People with endowments HAVE NOT asked their insurers to move their money into bonds so that the investment cannot recover and pay off the mortgage.

The insurers have been forced to do this by the regulator, which is worried that if the former reckless behaviour by the insurers continued, not only would the endowments not pay off the mortgage, they wouldn't even provide enough for the guaranteed sum assured :eek:

People with pensions HAVE asked the NU to move their money in the run-up to retirement to reduce risk. And the insurer has failed to do so, not only exposing its customers to the risk of failing pensions, but also its shareholders (and possibly some of its other customers as well) to the risk of being forced to pay compensation if the market had collapsed.

It's very clear that the risks of putting money with this lot are much more than simply whether or not the stockmarket is going to rise or fall.

Be warned.