L&G Red letter - eek!

Jetlagged_2

I have just received a red letter from L&G. I am really at a loss as to what to do. I can't claim I was mis-sold as I did know the pitfalls, (although they were not explained to me by my FA at the time)
I have already converted the shortfall on to a repayment mortgage. So do I keep this policy, cash it in or make it paid up? If I keep it, am I just throwing my cash away?
Here is all the info I can find...
Start date - June 94 for 25 years
£125 per month
Target amount £86200
Shortfall at 6% - £20791, at 4% £33391
The last statement I received was Dec 2003, I must be due another soon
Basic sum assured £30167
Sum assured + bonuses - £37663

Sorry if I am being cheeky by asking, but is there anyone out there who can say what they would do in this situation?
many thanks

EdInvestor

Hi jetlagged

Don't despair :)As you've already sorted the mortgage shortfall, this is just an investment decision.

One more thing we need to know to assess the way forward: the current surrender value.

Probably best to ring them up and ask for an up-to-date one, then post.

Compensationitis

You may THINK you understood the risks attached but you can rest assured that you didn't.

Ask L&G what the premium should have been had they used their own charges to set the premium for your target amount.

I'm serious about this because of the correspondence on file.

dunstonh

It would be worth reviewing the target growth rate on the plan. If this is unreasonably high, you could argue that it never really had a chance of hitting target. Even if you do not go down that route, it will let you know if it is worth keeping or not.

Compensationitis

They were ALL 'unreasonably high' dunstonh, and they still are, the rates they use in reprojections now are unsustainable knowing what I know now. :mad:

The argument is that the preium was set too LOW to meet the TARGET amount.
<snip>

Good timing, we invite the providers to a meeting to discuss the matter.

A good article from Simon Bain, glad there are some decent media people out there who are prepared to wade through a mountain of paperwork, many are too lazy and prefer a simple tale of woe.

http://www.theherald.co.uk/business/37917.html

Think about this, every single policy was flawed, pensions (inc pension transfers!), FSAVCs, WOL, Bonds and so on and so forth etc etc.

What a mess! It wasn't that the LAUTRO rules said you MUST use own charges to set the premium, it was simply a crappy rule that didn't PRECLUDE the use of 'assumed expenses' in setting the premium and in the scramble for 'market share' they all lost the plot. Just think, there would have been no market for endowment mortgages if the premiums had been set using 'own charges' because the mortgage could not possibly compete with the repayment method, I would like to know which insurers 'slipped up' and continued this practice post 1995..... the FSA refuse to tell us.

Who is responsible? Somebody is, but they blame 'someone else' as if they all had imaginary friends. The pre-action letter of claim needs some extra legal beagle's attention.

I thank all those of you who contributed material evidence to this exercise, if you want to take it up with the ABI we need to get moving.

http://business.scotsman.com/banking.cfm?id=441532005

Look at the comment from FOS at the bottom.

Jetlagged_2

I have now obtained the surrender value. £15754.10
Slightly less than what I've paid in to the policy! I suppose that's usual.

Any advice would be gratefully received

EdInvestor

Hi jetlagged

If you keep paying into the policy you are guaranteed to get 37,663 at maturity and this might go up a bit, but not a lot methinks.

If you surrender now and invest the 15,754 surrender value in the bank at 4.5% and pay the premiums in as well over the 14 years to maturity you would get 58,261.

Pretty clear cut,I'd have thought. I would surrender, plough the lump sum proceeds into reducing the mortage and apply the premiums to the mortgage as well.

Replace the life cover if you need to before you surrender. Any misselling claim should also be kicked off before surrender.

Jetlagged_2

I have been trying to contact my IFA but it appears that they have ceased trading. Do I contact L&G direct or approach the FSCS?

I take it I can't surrender my policy until the FSCS allocate it a case number, so I could be paying into a policy I no longer want for some time yet?

Compensationitis

FSCS do not pay out on a projected loss, they only pay out on ACTUAL loss.

Jetlagged_2

Compensationitis wrote:

FSCS do not pay out on a projected loss, they only pay out on ACTUAL loss.

...I realise that. I have already converted my mortgage to a repayment. My ACTUAL loss is £15Ks worth of premiums over the years that could have gone towards reducing my debt.

I haven't got any documentation from the IFA. I don't want to put myself under stress by all this, so I am cutting my losses, surrendering my policy and trying to learn a valuable lesson from all this.

Compensationitis

The FSA or the FOS, even the FSCS can tell you whether there is someone you can complain to before they get involved, ask them.

Also , ask L&G what the premium would have been had they used their own charges to set the premium and keep me posted.