Miss sold endowment

Biff1666

Hi All,
after some advice.

Got a "RED ALERT:High Risk of a Shortfall" letter from J.Rosthschild Assurance regarding "Capital Repayment Plan" for the mortgage.
Sent template letter of complaint stating following reasons

1. The endowment was not suitable. The adviser did not explain there was a risk the endowment would not meet the target amount. The adviser did not discuss in full the funds my endowment was invested in.The adviser did not properly esablish my attitude to risk.

2. The sale didn`t follow the rules. The adviser did not fully explain the fees and charges on the policy.

3. The adviser said the policy was guarenteed to pay off the mortgage. The adviser said there would be a lump sum in addition at the end of the term.

Recieved a Mortgage questionire from J. Rosthschild but wasn`t shore wether to fill it in?

Recieved a letter stating:

"they are progresing with the review of the matters raised"
and
"Unfortunately, we have been unable to finalise our assessment of you complaint to date because you have not completed and returned the Endowment Mortgage Questionire.
As we do not hold your precise mortgage details I propose we now proceed on the basis of assumptions, Should we offer you compensation the calculation of this amount will be based on the information we have avialable and variuos assumptions,as appropriate.
Should we make you an offer of compensation you will be advised of the assumptions we have made. Of course we will be happy to recalculate the amount due to you if you let us have the missing information, but I must draw your attention the fact that if a fresh calculation results in a lower amount of compensation,then this is the amount that will be pais to you."

Should I have complete the Mortgage Questionaire?

The qustiones include:

Where you a first time buyer, when commencing your St. James Place endowment?

What type of investments did you and or your partner have at the time of commencing your St. James Place endowment?

Did you mortgage extend past your retirement date?

When did you become aware your endowment extended beyond your retirement and what plans did you have for repaying your mortgage in your retirement?

Would welcome any advice and guidence

Biff

dunstonh

Should I have complete the Mortgage Questionaire?

If you dont, they will review the complaint based on the information they hold. This could work for or against you depending on what information they have.

Biff1666

Hi All,
my "Sis in Law" has just recieved an "without prejudice" offer of £2500.This amount is in addition to the "surrender value" of her plan.
The only point is she is not sure if this is the correct amount or not. The projected shortfalls gives three amounts depending on the interest rate, 4%,6% or 8%. Her Letter states a projected short fall, based on 6% of about £11,000. This is a bit less then the "assumed rate of return of 9.5%" as stated in thier schedule when she was mis-sold the endowment. They also state in their "without prejudice letter" that they base thier calculations on "the standard variable rate of interest charged by Halifax during the period".Althought they don't state what that figure was?

Would be greatful if anyone tell me if this is figure is about right?

Regards

Biff1666

dunstonh

Would be greatful if anyone tell me if this is figure is about right?

If they have input the correct figures and used the FSA standard calculation then the figure would be right.

The shortfall projection has nothing to do with it. Plus, the use of Halifax SVR was your sister in laws choice. All providers use that data from Halifax if the individual chooses not to supply their own rate and date data.

m5nvb

Hi

Chances are the figure is correct, based on the calculation they have done with Halifax interest rates. The reason they use Halifax SVR is because they are the UK's largest lender and its therefore seen as fair to use their rates since they would generally be the same or lower than the actual rate charged.

You can always request them to recalculate the offer based on the actual interest rates you were charged, if you are able to provide that info (could involve going through old mortgage statements or requesting these from previous lenders). Usually, though you're only best doing this if you were on a lower rate than Halifax's SVR. The company involved should be able to give you a full breakdown of the calculation they have done, called Mortgage Fundamentals. This will show you the rates they have used. Also, the offer letter should detail any assumptions they have made in the calculation - i.e. using Halifax's SVR or the dates of any mortgage changes etc, if you have not told them this info. Again, you can request that they recalculate the offer if any of their assumptions are wrong.

Just bear in mind that any time you ask them to recalculate, the offer could go up or down and the new one would replace the original offer, regardless of whether it was more or less.

The reason that the offer is less than your projected shortfall is that the calculation only runs to the current day - its aimed at putting you back in the position you would have been in (now) had you take a repayment mortgage at the start. It doesn't take into account the future payments you would have made or any future shortfall. The companies offer you this amount, with the offer of surrendering your policy. The purpose is that, if you were to take their offer, surrender the plan and then take out a new repayment mortgage, reducing the balance with what you have received, then you would be in the same financial position as if you had started with a repayment mortgage. Obviously some people will not want to surrender their plan and lose out on any potential terminal bonuses etc so there is usually a second offer of compensation only and keeping the policy in force. However, you accept this offer now aware of the risk of shortfaklkl and it would be your responsibility to cover any shortfall at maturity. Unfortunately, no company will offer to cover the shortfall - they can't tell exactly what this will be and it would cost too much anyway.

If you are not sure whether to take the offer you can contact the FOS or have an IFA check the calculation.

Re the Mortgage Questionnaire - sometimes you are best to fill this out and sometimes you're not. It all depends on what info the company hold on file for you. Generally, the earlier the endowment was sold, the less info they will hold as the regulations were not as strict then and firm's were not required to complete so many forms/collate so much information. Anyone can request a copy of their endowment file - called a Subject Access Request - companies usually charge £10 for this. But this will let you see exactly what information the company has about the original sale and the advice given.

If the mortgage does extend past your retirement and they have not taken this into account then you would probably receive more redress/compensation if you told them this as it will change the calculation slightly.

Oh, and the reason that the projection rates have changed (ie the 4,6,8%) is because the market has changed. These rates are set down by the FSA and must be used by all companies when projecting maturity values on endowments. This is another reason your policy shows a shortfall - as the rates now used to project final values are lower than the ones used when the plans were sold.

Hope this helps. I worked in mortgage endowment complaints for a few years.

I always used to tell people that one of the biggest decisions you have to make is whether you are happy to continue with the endowment, knowing there is the risk of shortfall, regardless of any offer of redress you've been made. If you surrender the policy you could lose out on some potentially large bonuses at the end of the plan which can increase its value quite significantly. However, there's also the risk the markets could crash again and the value of the policy could take a drop, and that the terminal bonus could be very small, if anything at all. If you're not happy to take these risks then you should maybe think about the security of a repayment mortgage.

dunstonh

Anyone can request a copy of their endowment file - called a Subject Access Request - companies usually charge £10 for this. But this will let you see exactly what information the company has about the original sale and the advice given.

Firms are allowed to reject this when a complaint is in process or known to be coming.

If the mortgage does extend past your retirement and they have not taken this into account then you would probably receive more redress/compensation if you told them this as it will change the calculation slightly.

The FOS have backtracked on this in recent times. It was abused by too many people using it as an excuse to get redress when it didnt really apply. You now have to prove that you were going to retire at that age and you could afford to (when age is less than state retirement age).