My endowment compensation calc - ok or not?

sonnyflyer

Hi all....I'd be very grateful if any specialist out there could advise me whether to accept compensation for a mis-sold endowment from my buliding society.

I took out a £30k repayments mortgage in February 1985.
I was convinced to convert to an endowment policy in June 1987 - £29700 for a term of 22 years.
I re-paid my mortgage of £30k in October 1994.
However, I have maintained my endowment to date and continue to pay monthly premiums of £47.83. The policy is due to mature in June 2009.

The Building Society Compensation calculation:
initial compensation Jun87-Oct94 £4910.02
plus interest to date (net of 20%) £3810.62
sub total £8720.64


refund of premiums from date policy no longer used
Oct 94-present date £5978.75
plus interest to date (net of 20%) £1879.67
sub total £7858.42

Less most recent surrender value £15,737.00

COMPENSATION OFFER = £8720.64 + 7858.42 - £15737.00 = £842.06

What concerns me is that I have been penalised for paying off my mortgage early. After all, I had been incorrectively advised that my endowment would be worth far more than £30k at the end of the 22 year period - and therefore have continued to pay the premiums for the savings and life insurance element.

I am grateful nevertheless for some recompense......but am wondering whether I should refer to the Ombudsman. Your expertise would be greatly appreciated. Thanks very much in anticipation.

EdInvestor

How nice to get interest and premiums refunded, rather than have to put up with stockmarket losses like most people.

dunstonh

What concerns me is that I have been penalised for paying off my mortgage early

Why?

Had you been on repayment mortgage, you would still have repaid it. The compensation is to put you in the same position as a repayment mortgage, not to give you profit.

sonnyflyer

Editor wrote:

How nice to get interest and premiums refunded, rather than have to put up with stockmarket losses like most people.

Thanks for your very considered reply Editor... :rotfl: ....however, you'll find that the interest and premiums are NOT actually refunded...they are DEDUCTED from the compensation had I had a mortgage....otherwise I'd have ended up receiving a lot more than £800 !!!

Dunstonh....with regard to had I used a repayments mortgage and paid it off at the time, I would not have had to pay off more than I actually borrowed (as with the endowment mortgage) as my capital would have come down. I made an effective loss on my mortgage as having paid in premiums throughout the life of the mortgage, I ended up paying more than the original loan when repaying it. With regard to making a profit.......as an Independant Financial Advisor....do you not attempt to make a profit on policies for all your clients? I am also certain that you do not make them guaranteed promises of certain financial returns. However, thank you for your reply too.

My point is not one of ingratitude here ... .and forgive my ignorance if I have shown any....it is my first post after all....... I had a simple question regarding the liabilities mis-sellers have to customers who maintain a policy which has been "guaranteed" to meet certain targets but where the original mortgage has been re-deemed. Much the same as if my independent financial advisor had sold me a guaranteed with-profits policy.

Froggitt

Editor wrote:

How nice to get interest and premiums refunded, rather than have to put up with stockmarket losses like most people.

As misselling has been proven, sonny was obviously not told that his house was at the whim of the stockmarket....therefore a refund of premiums and interest, in compensation for the misselling, seems most fair.

EdInvestor

Certainly compensation for a loss incurred through misselling is fair, but I do think people who claim should always bear in mind where the money is coming from - and at a building society, or a life company With profits fund, it's from the savings of other policyholders.

Not from rich shareholders or fatcat company managers, or some bottomless pot of gold at the end of a rainbow, but from your fellow MSE members and other ordinary people who have savings or mortgages at the BS or endowments and pensions in the life company.

Sometimes I think people forget that.

Froggitt

Generally its not coming from the savings of other policyholders. Its usually an IFA having to stump up the compo, not the WP Fund, and they have usually made many thousands of pounds in commissions (plus interest) from the endowment since its inception. If however the BS puts up its mortgage rates to pay for misselling, vote with your feet.

ReportInvestor

Froggitt wrote:

Generally its not coming from the savings of other policyholders. Its usually an IFA having to stump up the compo.

Very few people have or had an IFA. Most homeowners had an endowment mortgage. I thought building societies who sold the mortgages have not been held responsible, but insurers have been.

When Britannia Life was sold, Britannia BS - its owners - cleverly got rid of any responsibility for selling its own Britannia Life endowents in Britannia BS branches .

EdInvestor

I haven't seen any figures on this, but I'd also have thought most endowments were sold by building society staff who were legally acting as "tied agents" - ie salesman - for the life insurers at the time - and hence the insurers pay the compo (from the WP members' funds )

Solicitors and estate agents also sold them, along with IFAs.With pre 1988 endowments, only the building societies or life companies will pay compo, because they respect the "duty of care" rules: the rest will usually not even consider it, even if they are still in business.

Froggitt

Reporter wrote:

Very few people have or had an IFA. Most homeowners had an endowment mortgage. I thought building societies who sold the mortgages have not been held responsible, but insurers have been.

Most people were sold endowments by their bank or building society, who were acting as their IFA. Its generally these banks and building societies who are stumping up the compo, not the LifeCo themselves.

dunstonh

Most people were sold endowments by their bank or building society, who were acting as their IFA. Its generally these banks and building societies who are stumping up the compo, not the LifeCo themselves.

Clarification on the IFA part. Most bank and building socities have/had tied advisors and not IFAs.

There are exceptions to that (especially pre 1988) but if we are talking "most", then its tied. The advice side of the process were often employed by a subsidiary of the bank rather than the bank itself but were viewed upon by the public as being a bank individual. So it was the banking subsidiary that is liable rather than the life company who just provided the product.