L&G Flexible Mortgage Plan ISA :(

Richard6

Hi, im not sure if this is the right section to post or if i should have put it in the ISA section, feel free to move accordingly if ive got it wrong.

Getting it wrong seems to be a recurring problem in my life as today i opened a letter from L&G with latest statement for my Flexible Mortgage Plan to find that they have taken / i have lost, double the amount that i have made in payments between the last statement in June and December.

I took out this plan as recommended by a local financial advisor around 15 years ago and we were told it was the best thing since sliced bread, and that we had got on just at the right time on what was going to be a financial revolution in mortgage plans etc etc.

We were told that this super duper plan set to run a 25 year period to repay our mortgage would not even need to run the 25 years to make the amount required to cover the mortgage and would expect to make it around 19 years, 21 at the most at which we could cash it and run or let it run the 25 years for an extra tax free bumper bonus/ nest egg to us for the extra years paid in. Nice, that will give us cash for a nice well earned holiday somewhere really nice.

As it was our first ever mortgage and home purchase, it sounded quite good with all the tax saving stuff that the government couldnt touch etc, though it was a lot of information to take in and try to digest.

We also had our mortgage set up with a lender by this advisor who claimed he would be chasing the best deal for me when our 2 year deal ended and that switching every few years from deal to deal would be expected as he worked tirelessly to save us money over our 25 year term.

At the end of our two year deal, the phone never rang and due to work commitments having me work away from home alot, i ended up foolishly on the variable rate, over paying by a mile for about three years. I ended up sorting this out just in time and it is on a tracker at BBR + 0.25% which has been nice. However we have never heard from the financial service provider, he has left the town and i understand that he is no longer linked with L&G.

The bigggest problem is that after 15 years of investing in said L&G scheme that not only has the fund failed to meet 40% of the amount required but now they appear to be taking double what i pay them out every 6 months. We didnt lose money during and after the 2008 crash so why when Mr Osbourne tells me every seecond day on SKY news how our country is doing so well is my mortgage plan going out the window?

I have phoned L&G and I am awaiting a written explanation of what is going on with a product that doesnt appear capable by a mile of serving the purpose it was intended.

Can anyone advise me on my current problem and whats the best way of making the 60% + shortfall over the next 9.5 years. Should I withdraw the plan? and if so, will i be taxed on it? and if so where can i put it without penalties? i dont really want to pay another fly by night admin fees (of which previous fees were not disclosed, they were paid to him direct from L&G)

This product was meant to have us sleeping easy at night, however i cant see us getting much sleep now.

Thanks in advance for any help and advice and I am aware that I do need to seek proffesional advice outwith this forum, just a case of finding someone to trust!

Happy New Year to you all :beer:

dunstonh

Getting it wrong seems to be a recurring problem in my life as today i opened a letter from L&G with latest statement for my Flexible Mortgage Plan to find that they have taken / i have lost, double the amount that i have made in payments between the last statement in June and December.

Not unexpected. Although not a bad thing in the long run.

At the end of our two year deal, the phone never rang and due to work commitments having me work away from home alot, i ended up foolishly on the variable rate, over paying by a mile for about three years.

If it was an employee then maybe they moved on. However, that didnt stop you do anything. The use of L&G would suggest an employee for a salesforce and most of those were made redundant in the early 2000s.

The bigggest problem is that after 15 years of investing in said L&G scheme that not only has the fund failed to meet 40% of the amount required but now they appear to be taking double what i pay them out every 6 months. We didnt lose money during and after the 2008 crash so why when Mr Osbourne tells me every seecond day on SKY news how our country is doing so well is my mortgage plan going out the window?

The value would have fallen during the early period of the credit crunch. The stockmarkets fell 45%. Although as per usual, they bounced back over the following years and those cheaper years have benefited you.

an anyone advise me on my current problem and whats the best way of making the 60% + shortfall over the next 9.5 years.

That doesnt sound too far off then if you have 9.5 years left.

Should I withdraw the plan? and if so, will i be taxed on it? and if so where can i put it without penalties? i dont really want to pay another fly by night admin fees (of which previous fees were not disclosed, they were paid to him direct from L&G)

The previous one would have been sold by an agent on commission. Not fees. The fees would have appeared on the disclosures issued at point of sale and followed up in the post from L&G.

You can withdraw, keep it going, overpay the mortgage etc. All of these could be viable options but we lack info to really go into the depth you need. If it makes you feel better you should sell the ISA use the money to reduce the mortgage and then overpay by the required amount to ensure the mortgage is paid in time.

I do need to seek proffesional advice outwith this forum, just a case of finding someone to trust!

You should never use a sales agent from an insurer. However, not many of those left on the investment side nowadays (they mainly exist on the mortgage and insurance side nowadays). You should use an IFA. However, an IFA will be fee based as there is no commission.

If you prefer to DIY on this then look up about how investments work and how they go down as well as up and a negative period with nearly 10 years to go is nothing to worry about and is actually a good thing. If you want to move to a guaranteed option then surrendering the ISA and reducing the mortgage balance and over paying is the only option that fits that.

Richard6

Hi, thank you for your reply. It was a financial advisor set up on his own and was a sole trader. I've just found out he is now trading in a town about 20 miles away from me.

There was no legal and general signage outside and we presumed he was not tied to a specific lender, especially as he changed the mortgage provider to another in order to get paperwork completed before I changed employment to another company as the first company would not complete the paperwork until nearer our move in date and didn't want a new job affecting a desicion.

Yes, I took a hit from the bank being on the variable rate but my employment took priority and it was an expensive lesson for not sorting out what was quite an easy thing to do. I expected the process to be as complicated as the initial set up, which it wasn't. My lender prob hates me now for the rate that I am on now as its the same bank!

Would I be able to cash the isa from l&g and pay off some of the money owedto the bank or do I have to set up a new mortgage for the reduced amount? Or does the money have to stay frozen with L&G for the 25 year period?

It's been said that my position in the term 15/25 years is expected and 40% of amount owed isn't considered bad, however my fear is what has happened in last six months repeats itself or worse between now and June and I find my pot minus another £1100.

I've looked back all my statements and even after 2008, my statement showed an increase every six months though smaller than previous years to 2008. This is the first time the amount on the statement was less than the previous statement.

I have paid around £600 between June and December and plan is down £1100 than what it was worth in June to put some figures out there and this is the first indication that something isn't right as far as I can see and alarm bells are ringing.

dunstonh

It was a financial advisor set up on his own and was a sole trader.

It would need to be a financial adviser to be able to do investment class business. From what you say, it was a tied sales rep of L&G (they still had them during the period you said you took it out).

There was no legal and general signage outside and we presumed he was not tied to a specific lender, especially as he changed the mortgage provider to another in order to get paperwork completed before I changed employment to another company as the first company would not complete the paperwork until nearer our move in date and didn't want a new job affecting a desicion.

Tied agents or restricted advisers can operate under their own brand. It may have been an IFA but its not the sort of product you associate with an IFA. Being tied to an insurer does not mean they are not whole of market for lending. Most tied agents are whole of market on the mortgage side. Although that is now ancient history for you.

Would I be able to cash the isa from l&g and pay off some of the money owedto the bank or do I have to set up a new mortgage for the reduced amount?

Yes you can but you need to check if there are any surrender penalties on the ISA and whether there is any tie in period on the mortgage that could result in an early repayment charge. Waiting until there isnt is usually the best idea.

It's been said that my position in the term 15/25 years is expected and 40% of amount owed isn't considered bad, however my fear is what has happened in last six months repeats itself or worse between now and June and I find my pot minus another £1100.

It is important for there to be negative periods like this. If there isnt it makes it harder for the investment to hit target. The last 6 months is a tiny loss. It doesnt get classed as a crash. Just a correction. The sort of thing that happens every 2-3 years typically.

I've looked back all my statements and even after 2008, my statement showed an increase every six months though smaller than previous years to 2008. This is the first time the amount on the statement was less than the previous statement.

That shouldnt be possible given the scale of the drop over 2008/2009. Even with your regular payments, the value should have dropped given the 45% crash that occured in that period.

Richard6

I will PM you the plan totals year on year shortly.

Thanks again.??

mitchb

Op - I could have written the above. Our scenario's are almost identical In relation to L & G product / timeframes and lost value. Only difference is I changed to a repayment mortgage 10 year ago and view this ISA as a nice little bonus when it pays out in 9.5 years


I'm keeping a keen eye on my next update which will be June 2016 before deciding which, if any action I need to take.

Richard6

mitchb wrote: »

Op - I could have written the above. Our scenario's are almost identical In relation to L & G product / timeframes and lost value. Only difference is I changed to a repayment mortgage 10 year ago and view this ISA as a nice little bonus when it pays out in 9.5 years


I'm keeping a keen eye on my next update which will be June 2016 before deciding which, if any action I need to take.

PM sent, let me know if my ups and downs in my fund bear a resemblance.

Thanks, Rich.