Initiating a complaint about an endowment’s performance

GWAM

Hi,

First post.

I’ve just spoken to a provider and informed them that I wish to complain about the “performance” of my 25-year endowment policy taken out in August 1992. I then spoke to the Ombudsman just to check out the lie of the land and likely timescales etc.

The feedback from both was encouragingly instructive and I'm now awaiting the first return correspondence from my provider (promised within 5 working days).

However, I think (key word) that I detected - from both parties - that my complaint might likely fall between two stools given that it’s not about mis-selling (we were compensated: £2k circa a decade ago) nor about the principle of a shortfall (which we’ve long since become reconciled to).

So, the nub of my query: how likely is it that my complaint will at least make it to the serious consideration stage and not automatically be binned because it’s beyond presumed complaints timescales (based on the general reality that most endowment complaints are either about the aspects of the initial mis-selling or the non-acceptance of a shortfall per se)?

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Some background.

The original provider was Woolwich. The policy then transferred to Barclays. Then to a third provider. We were mis-sold: we were told in 1992 that, as first-time buyers, we had to take out an endowment with the Woolwich (whom we wished to use, based on family history/loyalty; naive indeed). Our attitude to risk was that there was no risk of never being able to meet the target amount (38k) by 2017; the only question was what we might get in excess of 38k.

We knew we were a red-letter case by 1993 and we gradually reconciled ourselves to the inevitability of a shortfall. We re-adjusted all of our life plans and decided to maintain the policy: £54 per month. We moved out of the original property in 2002 and took out a repayment mortgage on our new property (so we’re not dependent on the original endowment any longer).

Looking at the annual red-letter projections year-on-year, the figures were at least steadily heading north. We just accepted this reality. We took the long-term view that by 2017 we might receive something in the region of £26k - 30k. We’ve always considered that £26k would be a decent recovery over the 24-year period since we were first informed (in 1993) that we would have a shortfall. No basis to that really, other than hoping that the extent of the shortfall wouldn't go beyond £10k.

Over the two episodes of 9/11 and the 2008 crash, the annual projections stuttered, of course, but actually didn’t suffer as much as we feared. In fact, the policy seemed encouragingly robust.

Suddenly, in 2013, after years of projections heading in the right direction (whilst never of course threatening to get anywhere near the target of £38k) the forecasts started heading south. We waited in 2014 to see whether this was just a blip; but no, they went down again. The same happened in 2015. It has happened again with our 2016 (penultimate year) projection. A pattern is now clearly set. Hence my initiation of a "performance" complaint.

The final amounts illustration in 2013 was:

22.4 k (1.50pc growth); 24.2k (4.50pc growth); and 26.1k (7.50pc growth)

The projections have fallen in each of the last three years. The latest is:

21.5k (1.50pc growth); 22.3k (4.50pc growth); and 23.1k (7.50pc growth).

There is no end top-up/balloon.

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I realise (and especially from noodling around the forum) that perception of “performance” is subjective. I accept that. Some people might think the policy has recovered well, others may not.

But given that the policy managed to ride the storms of 9/11 and 2008 quite well, I can’t for the life of me see why a clear pattern has suddenly emerged, so late in the day, which now looks likely to yield something circa 20k when the policy matures in August 2017 (roughly back to the projections circa 2012).

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Any advice would be appreciated - but specifically about progressing a complaint on this nuance, and also my concern that we may fall between the assumed complaints categories of “mis-selling” and “shortfall non-acceptance” (both with the provider and the ombudsman).

Thanks.

magpiecottage

In theory you can complain about investment performance but I have never heard of an ombudsman upholding a complaint on that basis. They have, though accepted that poor investment performance might alert a consumer to an underlying cause for complaint and take a case on based on this.

However, you have a contradiction. You tell us

GWAM wrote: »

we were compensated: £2k circa a decade ago

That would have been in full and final settlement of any claim against Woolwich.

GWAM wrote: »

how likely is it that my complaint will at least make it to the serious consideration stage and not automatically be binned because it’s beyond presumed complaints timescales (based on the general reality that most endowment complaints are either about the aspects of the initial mis-selling or the non-acceptance of a shortfall per se)?

It won't be either. If they still have a record of the settlement then this complaint will be rejected and FOS will not be entitled to look at it.

GWAM

Thank you magpiecottage,

The compensation we received was only in respect of the original mis-selling. I agree that it was in in full and final settlement against the Woolwich but only in that precise regard. My complaint is now purely about the subsequent performance against a third provider. So surely this would qualify as a different matter especially given that it's a different organisation we're dealing with?

I fear you may be right, though. For there was definitely a sense I got from both my provider (expected) that my complaint may not stand up, and from the Ombudsman (not expected). I didn't pursue the matter further as I preferred to wait until sight of the return correspondence from my provider. But you may have hit the nail on the head.

Perhaps they were both hinting that settlement about mis-selling might preclude any further complaints, even about (perceived) poor performance with other parties to whom the policy has been transferred.

I certainly got the sense that it might be a hard case to win.

banks4u

I'm sure your time barred, check your red statements. Also why did it take so long for you to even consider complaining ?

I used to review endowment complaints and performance isn't a factor. It's only if you were missold a policy, I only upheld a few endowments due to paperwork being shocking.

Thrugelmir

GWAM wrote: »

The same happened in 2015. It has happened again with our 2016 (penultimate year) projection.

On what basis do you consider the past 2 years to be good investment wise?

GWAM

banks4u wrote: »

I'm sure your time barred, check your red statements. Also why did it take so long for you to even consider complaining ?

I used to review endowment complaints and performance isn't a factor. It's only if you were missold a policy, I only upheld a few endowments due to paperwork being shocking.

Hi,

Thanks for replying, much appreciated.

We complained about the mis-selling within the timeframes (it took a long time to settle it). But we've never considered complaining about the performance aspect until very recently as, having long-accepted that we were going to fall short, we lay-judged that at least the annual projections were heading in the right direction. Alarm bells didn't really ring for us until we started to see the annual projections suddenly moving in the wrong direction in 2013. We initially thought this might be a blip and there would be a correction in 2014/15. It would seem clear now, unless this pattern is arrested as suddenly as it set in, that our final figures will be back to circa 2012 levels (e.g. forecasts rose every year from 1993 to 2002; there was a drop in 2003 [probably related to 9/11]; and then they resumed climbing between 2004 and 2009; they dropped slightly in 2010 [probably the effect of 2008]; and they then climbed again from 2009 to 2012 but have been falling ever since).

GWAM

Thrugelmir wrote: »

On what basis do you consider the past 2 years to be good investment wise?

Hi,

Thank you for getting back to me,

Well, no expert opinion/analysis other than the reality that prior to 2013, the only blips we had seen since 1993 were (presumably) directly related to both 9/11 and the 2008 crash. The policy seemed quite resilient. We were able to lay-forecast that our projections would fall in the immediate aftermath of both those events and it was perversely re-assuring to not only see that we were correct but that the policy projections returned to positivity quite quickly (i.e. by 2004 and by 2010 respectively).

But since 2013 it's all been downhill.

Unless there's a sudden upturn next year (our final one) it will complete a final five years of reducing projections. I'm not aware of any identifiable market factor (like 9/11 or 2008) that could have triggered a concerted post-2013 downtrend.

macca1974

Firstly, you might as well complain, it won't cost you anything, but I would expect it to be rejected to be honest.

The thing that you can complain about is effectively the financial advice that you receive. i.e. have you been recommended a product that isn't in line with what you needed at the time it was advised. Clearly you were "mis-sold" the endowment along with lots of other folk 25 years ago. However, the whole endowment review saw to that and you were compensated. And this was the compensation for the original advice.

What you are talking about now is not whether the endowment was right for you at the time (it clearly wasn't and compensation has been offered and accepted). What you are wanting to complain about now is the fact that the investment performance hasn't been very good. Now, investment performance isn't guaranteed and will depend on lots of different factors (markets, the way the fund is managed, charges etc). However, the only way that you would be able to get a complaint across the line with a complaint about performance is to prove that the fund / product hasn't been managed in line with how it should have been. How it should have been managed will have been set up in the bass prospectus or whatever documentation was used when it was set up. I would be willing to guess that the product has been managed in line with this and that the reason for the performance is down to charges, investment decisions etc.

GWAM

Thank you macca1974,

This is all sober reading but at least it's instructive.

I suspect that investment decisions may be part of the post-2013 downtrend we've experienced; but I hadn't considered charges as a factor.

The only external factor that I can identify is that the policy was transferred for the second time in 2011 (originally a Woolwich policy, then Barclays, now a third party) and shortly thereafter the annual projections have started to fall (in contrast to the entire period of the policy, excepting the quickly rectified dips post-9/11 and 2008).

e.g. the 1.50 per-cent growth projection in 2015 @ £22,100 is now set at £21,500; we were circa £20k in the 2012 projections at 1.50 per-cent.

The policy just seems to turned backwards.

As it stands, by the end of the policy we'll have invested some £16,200 over 25 years and we'll likely only get somewhat above £20k.

Anyway, I will push on with the complaint and see where it takes me. I'll certainly keep the forum updated; you never know, it may reveal some worthwhile intelligence. Thanks again.

dunstonh

The compensation we received was only in respect of the original mis-selling.

And that closes the door to any complaint.

The FCA do not allow complaints about performance. However, a complaint about performance would trigger a review about the original sale. But this has already happened. So, it would be game over. They could also bar you from access to the FOS as you had already complained and well past the 6 month point.

But given that the policy managed to ride the storms of 9/11 and 2008 quite well, I can’t for the life of me see why a clear pattern has suddenly emerged, so late in the day, which now looks likely to yield something circa 20k when the policy matures in August 2017 (roughly back to the projections circa 2012).

There was a stockmarket crash in autumn last year.

The only external factor that I can identify is that the policy was transferred for the second time in 2011 (originally a Woolwich policy, then Barclays, now a third party) and shortly thereafter the annual projections have started to fall (in contrast to the entire period of the policy, excepting the quickly rectified dips post-9/11 and 2008).

The regulator sets the projections and the have reduced the rates to be used several times over the years. Even a fund with high potential and a history of high returns would have to use the lower projections. Whether it had Barclays, Woolwich or Reassure as the logo would make no difference.

GWAM

Thank you dunstonh,

Yes, I'm beginning to see that the chances of progressing a complaint in this respect are minimal-to-zero; but will still give it a punt.

Regarding the volatility of the stock market in the second half of last year:

Agreed. But our policy started a concerted downtrend three years ago. My fear is that the market trends of late 2015 haven't yet fully featured in the projection I've just received. Perhaps there is even further bad news to come in May 2017 (there will only be three months left before maturity at that point).

Good advice about the regulator setting the projections. Any information is most worthwhile and much appreciated, however bleak!