Endowment shortfall

Bellamaria1234

Hi, hope someone can answer my question.

we took an endowment mortgage out with Norwich through the Halifax in 1989 /1990 for our first home.
We were told over and over that this was the best mortgage to have as it would be guaranteed to pay off the mortgage and give us at minimum £8000 extra. When you're young and inexperienced and your building society manager is sitting in front of you , you take their word for it and so we took it out.
About 5 years later we discussed this with a family member and when we did our sums, and although it cost a bit more each month, we changed to a repayment mortgage but kept the endowment as our family was growing and the guarantee of the end amount would help for if we moved.
A few years back when we received a letter to advise that there would be a shortfall I wasn't happy so decided to challenge them.
There reply was that because we changed to a repayment we were not able to pursue any claim but surely this has nothing to do with them as I would need the money to help pay off my new mortgage and this is what we were told at the time it was sold to us.
Do we have a leg to stand on as I still have 15 years to pay on my mortgage and this would have helped???

holly_hobby

In respect of mortgage endowment complaints, any compensation in respect of a justified complaint - is the monetary difference between a repayment (inc lifecover if reqd) and endowment mortgage (inc any surrender value), over the term the policy was used as a mortgage repayment vehicle, or you became aware of the risks associated with the policy if earlier.

In your case, after 5 yrs of holding the endowment mortgage and policy, you elected to switch from an interest only mortgage to a repayment mortgage, even though it was a higher monthly costing - suggesting you did so because it was at least at that point (if not before) that you were aware of the risk factors associated with the endowment policy, and that it may not meet you mge requirements, hence the switch to a higher payment for security of mortgage redemption.

Despite changing to a repayment mortage in 1994 (just about 2 decades ago), you however elected to retain the policy as a family savings vehicle, which was a decision that you now regret due to continued poor performance indicated within your annual review statements/estimated maturity value statements. Unfortunately, you can neither complain nor be compensated for loss of expectation ie poor performance, which is essentially what you complaint seems to centre around.

And even if it was determined you were mis-sold at outset (and if you're not time barred, which is probable by now, since red letters commenced 2000 and you having 3 yrs from your 1st red to complain), your mortgage endowment compensation calc would only ever be calculated over the first 5 yrs of your mortgage (ie upto the point you changed to a repayment mortgage and your policy ceased being used as a mortgage repayment vehicle).

Sorry, this won't be what you wanted to hear, but nevertheless its how things will stand for you.

Hope this helps anyhow ..

Holly x

Bellamaria1234

Thanks Holly,
However, the reason we changed to a repayment was because we wanted to see the mortgage reduce and with the endowment, that would never be until the end date.
we at this point did not know there was going to be a shortfall as this was revealed many years later.
Also I don't regret keeping the endowment running or changing to a repayment, my argument was that we were told when we took it out there would be a guaranteed amount plus bonus, they didn't advise that this would not stand if we changed to a repayment as the Norwich endowment policy is still running and is not attached to the mortgage and we still get shortfall letters, so they obviously don't realise that its not for the same mortgage.
so it was missold to us.

holly_hobby

Bellamaria1234 wrote: »

we still get shortfall letters, so they obviously don't realise that its not for the same mortgage.
so it was missold to us.

NO, you are misguided by whomever is advising you.

The shortfall letters continue as a FCA regulatory requirement, because its a low cost endowment, which was sold and typically used to support an interest only mortgage - you had 3 yrs from the FIRST red letter to complain on suitabilty, not loss of expectation (poor performance).

You should also be aware that my comments are based as someone whom is employed reviewing such complaints, so are based on knowledge rather than opinion, and any compensation even on a justified complaint (which is doubtful given your prev statements, and taking into account the timebarr issue) can only be based on the term your policy covered your interest only mortgage ie the initial 5 yrs, which will be neglibile to be honest - and that calculation isn't open for debate , even at full Ombudsman level.

Hope this helps, even although I can tell you won't welcome the above comments ....

Holly x

missingtowindward

Time and again I continue to read that policyholders 'cannot complain about poor endowment performance' when it is clear that we should be complaining and the companies should be explaining with facts and figures why they are in the business of diminishing returns.

If the national football team produce a poor performance people !!!!! and moan until the cows come home. And thats just a game!

Endowment firms should be much more accountable to their customers and on a personal basis rather than relying on generic letter formats where it is clear that they are showing no interest in the individual.

It's time to take the game to the endowment companies and have our questions answered with accuracy and good grace.

mystic_trev

I'm afraid whatever the merits of your case, it's far to late to try getting compensation i.e. it will be time barred.

opinions4u

missingtowindward wrote: »

Time and again I continue to read that policyholders 'cannot complain about poor endowment performance' when it is clear that we should be complaining and the companies should be explaining with facts and figures why they are in the business of diminishing returns.

Endowment firms should be much more accountable to their customers and on a personal basis rather than relying on generic letter formats where it is clear that they are showing no interest in the individual.

They are in the game of managing collective investments. So other than the policyholder's name on the letter, what are you really expecting to see?

It's time to take the game to the endowment companies and have our questions answered with accuracy and good grace.

When the policies were sold historic investment returns were higher than those achieved after the sale. It's no more complex than that.

Another unanswered question. Why didn't most policyholders use lower interest rates as an opportunity to offset this by reducing their mortgage debt faster by overpaying?

missingtowindward

opinions4u,

Unit Trust Funds are in the business of managing collective investments and they are able to provide very detailed information on the way in which each individual fund is managed.

It's all there in the public domain for easy access: investment aims, portfolio's, charges, daily valuations and even the name of the fund manager at the top of the tree.

So why can't endowment 'with profits' fund companies match the same level of public scrutiny? Prehaps there's something to hide!

holly_hobby

The fact is you were aware if not from outset (which I think is proven) then at least 5 yrs into your policy term, that the policy had investment risks - ALL investment policies (bar full endowments) do, and thats just the way it is.

It is also established that being aware of the risks, you decided this wasn't a suitable method for you to base repayment of your mortgage on - so you switched to repayment (sensible move) but elected to maintain you policy as a savings plan - in the knowledge that the target sum was not guarateed at maturity.

There are several reasons for the poor returns for policies effected from late 80s early 90s, but fundamentally and brass tacks its now accepted that this was largely down to prems being set too low (based from previous yrs and optimisit returns), and returns (due to reducing interest rates and very volatile markets) simply not producing the returns they had done when we had mge interest rates as high as 14%, where poor/cautious fund management of course also played a part. If you want to learn more on the whys and wherefore's, there is a sticky on endowments where I and others have discussed the details of why those policies effected from this period onwards, were more exposed to shortfalls to target, but the flip side was mortgage interest rates were constantly decreasing, reducing the overall cost of the endowment mortgage.

Anyhoo, still doesn't change the fact unfortunately that at very best you'd only have a calc based over 5 yrs(notwithstanding the issues re demonstrating awareness from point of sale), and that essentially you've been time barred for some yrs

I know this will disappoint, and even those of us in the business have suffered such shortfalls on the policies, which I say to illustrate that my comments aren't defensive or derogatory, but just fact unfortunately.

Hope this helps in any event

Holly x

magpiecottage

missingtowindward wrote: »

So why can't endowment 'with profits' fund companies match the same level of public scrutiny?

They do.

Ask for their Consumer Friendly Principles and Practices of Financial Management (CFPPFM).

John1993_2

missingtowindward wrote: »

Time and again I continue to read that policyholders 'cannot complain about poor endowment performance' when it is clear that we should be complaining and the companies should be explaining with facts and figures why they are in the business of diminishing returns.

No-one is saying that you cannot complain, so please ,knock yourself out.

They are, however, saying that no-one's going to listen to your complaint (if it's in line with the OP's) and then hand you some money because of it.

You seem to be a bit confused about what the endowment is, by the way. It's invested in companies, bonds, and so on. The price of these is not controlled by the company who sold you the endowment, so they are not "in the business of" any returns at all.