Just received miserly endowment compensation offer, Advice needed please :-(

nickT

This is my 1st post so please be gentle with me!

We started our mortgage in 1992 through an independent adviser. We had no savings and we were advised to take a 100% mortgage and an endowment with Standard Life ( Life with profits).

We were told that the endowment would pay off the mortgage after 25 years leaving us with a nice little lump sum afterwards. How naive we were!

Our last prediction dated June 2006 shows the following shortfalls...
RED ALERT:
Shortfalls:
Low Rate - £23250
Intermediate Rate - £19150
High Rate - £14450



I think that I may have gone about my claim for compensation in the wrong fashion. Let me explain...

We started the ball rolling with the FSCS just over a year ago. It appears that the Financial Adviser we used in 1992 ceased trading just after we started the claim. The FSCS has just offered us £492 in compensation!

My main questions are as follows...

Should we have tried to claim from Standard Life?
Have I gone about this in the wrong way?
Can we still claim from Standard Life?


I read about all of these fantastic compensation offers and can't quite believe what we have been offered. At the very best we are going to be nearly 15k short at the end of the term.

Any advice would be most welcome.

toonfish

first of all, you don't get "compensation" as such, but financial redress to put you back in the position you would be in had you taken a repayment mortgage at the outset. This is calculated to a set formula so, in effect you would have paid off £492 more on a repayment mortgage than the surrender value of your endowment.

If you take the mortgage promise into account, potential terminal bonus and the standard life shares you probably haven't done as badly as you think.

there's nowhere else to claim I'm afraid

nickT

Thanks for the reply. I am puzzled about these large settlements that I have read about. Are they just rare cases?

From my point of view if I have been advised to take out a repayment mortgage I would not be looking at a 23 to 15k shortfall now.

JoeK_3

The size of redress is based on the difference between an endowment and a repayment mortgage assessed at the time of claim. The large figures of redress that you are quoting will have been made at the time of the stock market crash, when bonus payments were at rock bottom.

The good news is that stock markets have recovered and so has your endowment as a consequence.

Do see an Independent Financial Adviser (IFA) that understands endowment shortfalls and projections to advise you.

JoeK

dunstonh

Should we have tried to claim from Standard Life?

No. You cannot claim from them as they have never given you any advice.

Have I gone about this in the wrong way?

No.

Can we still claim from Standard Life?

No. They have done nothing wrong. One day an application turned up and they processed it as instructed.

Thanks for the reply. I am puzzled about these large settlements that I have read about. Are they just rare cases?

You are a few years too late. Endowments have been recovering and the big payouts of years ago are now much smaller as the stockmarket has recovered. Standard Life are not as bad as you think and indeed, if the redress is only £492, that probably means you are currently better off as they look at the surrender value and not the current value. The surrender value usually has a penalty which I would expect to be more than £492.

Standard Life projections are notorious for understating the real position. They do not include the terminal bonus accrued to date and they do not include the mortgage promise value. At times, Standard life have issued projections which were lower than the guaranteed minimum maturity value which just isnt possible.

You should ask Std Life for a new projection and you will probably be quite pleased at the improvement. You should also ask them the maximum mortgage promise value and the current terminal bonus. Add those two figures to the projections for a more realistic outcome.

The people that got redress a few years back and held on to the good endowments have basically ended up with free money as there is a good chance many of them will end up hitting target and paying a surplus as well as being paid redress a few years back.

EdInvestor

To try and put this into perspective (and for some suggestions about dealing with the shortfall), post some more info about the policy:

Guaranteed sum assured
Declared bonuses
Surrender value
Monthly payment
Maturity date
Maturity forecasts

Interest rate you are paying on the mortgage

MoaningMyrtle

I know someone who got good compensation she and was mis-sold a pension mortgage. I know she went through SESAME and she also had every piece of paperwork from 1986 onwards. She got the money last year to enable her to pay off her mortgage, otherwise she would have had to sell her flat.

dunstonh

MoaningMyrtle wrote: »

I know someone who got good compensation she and was mis-sold a pension mortgage. I know she went through SESAME and she also had every piece of paperwork from 1986 onwards. She got the money last year to enable her to pay off her mortgage, otherwise she would have had to sell her flat.

Strange one. Sesame only deal with IFAs and any case sold before 1988 is automatically rejected as being prior to regulation.

The shortfall is not paid. If she did get redress as you suggest, then the surrender value of the policy was probably included in the redress which artificially increases the value.