L&G Endowment Mis-selling...... Help!!!!

mikey1973

Hi Guys

I hope you can help us.

My wife and I bought a house through a L&G rep in 1999.

When the rep sold us the policy she brushed over repayment mortgages with very little detail and put a huge emphasis to the endowment policy and its terminal bonus. She presented the endowment route as a very attractive proposition and in not so many words made it sound that this policy would definitely pay off our mortgage, and provide this terminal bonus. She sounded very professional and put our minds at ease so we went down the route she recommended. As very naive first-time buyers we put our trust in this woman, which proved to be our downfall.

Over the following two years the performance statements came through and already showed a huge projected shortfall. We were obviously very worried considering the short time the policy had been running.

We sold the property in March 2001 and moved into RAF married quarters due to our circumstances at the time. We decided to keep the policy going as a savings investment, even though it wasn't predicted to pay off our original mortgage.

Over the coming year or so the policy continued to fall in value and we decided to surrender the policy and lodge a complaint as we felt we had been mis-sold the policy.

When the policy was originally sold to us we did not want to take any risks and wanted to guarantee paying off our mortgage, although at the time the L&G rep noted our attitude to risk as low. This was only the case because there was no lower risk option.

The complaint we lodged came to no avail and L&G told us that if we were unhappy with their decision we could refer our complaint to the FSA.

Over a long and lengthy process our case was firstly refered to an adjudicator which failed and then onto the ombudsman who in 2006 denied our case as well. In both instances we felt that the our complaint failed due to the fact it was our word against the L&G reps.

This all happened at a time when as some of you are probably already aware L&G were under investigation for mis-selling and had been fined over £1m for this.

There were allegations from a previous company executive that the predicted growth rate of these policies had been stated (as it had been to us) as 7.5% but based on internal L&G forecasts, returns were more likely to average 5.25%. If this was in fact the case our policy was working at a loss as soon as we signed on the line.

L&G took the case to tribunal and although they succeeded in reducing the fine they were still found to be guilty of mis-selling.

Our question is even though the Ombusman denied our claim last year, now that L&G's tribunal case proved they were guilty do we have any recourse?

Thank you for taking the time to read this.

If you are reading this Martin I would greatly appreciate your comments.

Kind regards

Mikey1973

dunstonh

Over the following two years the performance statements came through and already showed a huge projected shortfall. We were obviously very worried considering the short time the policy had been running.

Most of which is not down to performance but a lowering in the growth percentages used for the projections.

Our question is even though the Ombusman denied our claim last year, now that L&G's tribunal case proved they were guilty do we have any recourse?

No. You are complaining about the advice given and it sounds like it is water tight. You would expect a late 90s case to have much better documentation. Hence the your word against theirs response you got.

To be honest, even if you got the decision overturned, you are unlikely to get any redress. You only had a mortgage for 2 years and its that period that only matters. If you had gone with a repayment mortgage at that point you would have repaid hardly anything in that first 2 year period. The amount would be much the same as the surrender value on the endowment at that point. The years from 2001 until surrender dont matter as there was no mortgage and you cannot complain about investment returns.

mikey1973

Firstly, thank you dunstonh for taking the time to read my post and reply.

I understand what you are saying, but the fact I cannot get my head around is that we were originally sold the endowment based on growth rate figures of 7.5%. As I said L&G we fined for mis-selling endowments. Part of this case centered around the fact that their own internal growth projections were actually 5.25%. L&G new this fact to be true but still continued selling them, telling customers (like us) about this fictional 7.5% growth rate. Surely this means that we were basically conned into buying the policy with an over-inflated projection. The L&G rep made it look attractive by giving us false details.

If the true figures were shown to us the policy would not have looked as good an investment. Being that L&G were found guilty of the above, and subsequently fined leads me to believe we should now have the right to appeal.

Regardless of how long we actually owned the house, we still continued paying into the policy as an investment until we decided enough was enough. Now we have been penalised because we didn't continue throwing money at L&G.

Also if we had gone down the repayment route we wouldn't have sold our house as we would not have had any cause for concern. The fact that the policy was grossly underperforming in such a short space of time basically frightened us into this decision.

I cannot believe that they should be able to get a way with selling us a policy using misleading figures, and that we should have to just sit quiet and take it. We lost, not a huge but reasonable amount of money on this farce and although it might be peanuts to L&G it means a great deal to us. A petty crook wouldn't be allowed to get away with something like this, so why should a big corporation like L&G.

Any further comments welcome.

Regards

Mikey1973

dunstonh

As I said L&G we fined for mis-selling endowments. Part of this case centered around the fact that their own internal growth projections were actually 5.25%. L&G new this fact to be true but still continued selling them, telling customers (like us) about this fictional 7.5% growth rate. Surely this means that we were basically conned into buying the policy with an over-inflated projection. The L&G rep made it look attractive by giving us false details.

The fine, which was reduced on appeal was to do with internal sales processes which were deemed to have deficiencies. I have had a look at the tribunal response and can see no reference to target growth rates.

A target growth rate of 7.5% by 1999 was higher than average (the few I did had 4.4% target growth rate and the last of those was 1997). However, that really doesnt matter. If the target growth rate had been lower, you would have had higher monthly premiums. So, whilst it would have been more desirable if you were to have kept it to the end of the term, it really makes no difference with regards to your complaint. Also, who is to say it isnt achievable? They have a track record of achieving in excess of 7.5% average on a number of their life funds. Even the with profits fund has been exceeding that in recent years.

Also if we had gone down the repayment route we wouldn't have sold our house as we would not have had any cause for concern. The fact that the policy was grossly underperforming in such a short space of time basically frightened us into this decision.

That is a decision you made yourself. You didnt need to do that. You could have switched to repayment mortgage if you wanted. After 2 years you were really no better or worse off so you made a decision at that point. No-one else can take responsibility for that.

You kept the endowment running by your choice and no-one else. If you were frightened enough to sell your house why did you keep the endowment?

Also, after just 2 years, even the best endowments on the planet on track for big surpluses would show shortfalls after just that short a time.

I cannot believe that they should be able to get a way with selling us a policy using misleading figures, and that we should have to just sit quiet and take it. We lost, not a huge but reasonable amount of money on this farce and although it might be peanuts to L&G it means a great deal to us. A petty crook wouldn't be allowed to get away with something like this, so why should a big corporation like L&G.

The projection figures used on the illustrations provided were set by the regulator and not L&G. The target growth rate of 7.5% would have matched the midrate figure of 7.5% set by the FSA at that time. It was fairly common for the midrate to be the target rate. (The changes to 4,6 & 8% occured in July 1999).

Whilst the investment returns have not been good enough, they are not grounds for complaint. L&G and the FOS looked at your complaint and both found that there was sufficient documentation, within the rules at the time, to show that you were supplied with enough information to make an informed choice. The fact you chose the wrong one or that you may have been "sold" that version as a preference to repayment mortgage doesnt matter.

mikey1973

dunstonh wrote: »

You kept the endowment running by your choice and no-one else. If you were frightened enough to sell your house why did you keep the endowment?

We kept the endowment going as a savings investment and also for the life cover it provided. The reason we eventually cashed it in was that the shortfall kept increasing. We did not feel that it was wise to continue paying into the policy.

dunstonh wrote: »

No. You are complaining about the advice given and it sounds like it is water tight. You would expect a late 90s case to have much better documentation. Hence the your word against theirs response you got.

From what you say about "it's our word against theirs" I imagine this is the same in most cases, so how does anybody win a complaint? Also when you say better documentation, what do you mean?

Mikey1973

dunstonh

We kept the endowment going as a savings investment and also for the life cover it provided. The reason we eventually cashed it in was that the shortfall kept increasing. We did not feel that it was wise to continue paying into the policy.

All decisions made by you and you alone. No-one gave you advice to do what you did. So, you cannot complain about that.

From what you say about "it's our word against theirs" I imagine this is the same in most cases, so how does anybody win a complaint? Also when you say better documentation, what do you mean?

Documentation is king. If the factfind and suitability reports contain all the required warnings and information to justify the advice given then it doesn't matter what you say was said. You could be telling the truth or you could be telling lies. Just as the adviser could do the same. It's a case of 4 truths. What you say happened, what they say happened, what really happened and how that is interpreted. - the documentation on file will often determine how it is interpreted.

Remember you are accusing them of mis-selling it. In effect, the system works in a similar way as accusing them of a crime. So, what evidence can you produce to say they committed this crime? If all you have is that you think was said, then it isn't very strong evidence. You could make all sorts up (and many do). So, the documentation is looked at as that is hard evidence. If the documentation shows all the risk warnings are in place and there is enough information on the factfind and suitability report to show that other things were discussed but discounted for xyz reasons then that documentation will beat your accusation.

Where documentation isn't available or insufficient, the complaint will usually be upheld unless a balance of probability decision needs to be made. Most complaints are not upheld. More complaints are rejected than upheld. Most that get redress payments are also not upheld but unproven but with redress payable. The main reason is down to poor or missing documentation. By 1999, documentation levels had improved. Still not at today's levels but enough to get most complaints rejected providing the adviser followed the rules. A 1990 endowment complaint has a much better chance of success than a 1999 purely down to documentation levels.

EdInvestor

mikey1973 wrote: »

When the policy was originally sold to us we did not want to take any risks and wanted to guarantee paying off our mortgage, although at the time the L&G rep noted our attitude to risk as low. This was only the case because there was no lower risk option.

If this is so I'd have thought the complaint should have been successful, though I agree with DH that the redress would have been negigible.