Norwich Union/Comm Union Redress Amount ???

dibbs26

Hi,
After pieces of correspondence backwards and forwards I finally got a letter today to say they are upholding my claim and offering me compensation......I originally started this back in February 2005.
They have based the compensation on if I had taken out an repayment mortgage and compared this amount with my actual endowment mortgage.
The figs are :
Endow Mort Val = £37368.46
Repay Mort Val if I had one = £26686.25
Difference between the above is £10682.21

Actual Endow Value as at 17/05/2005 = £5784.39

So the compensation value is £4897.82 (which is the difference the two mortgage amounts minus my endowment value).

Is the above reasonable and as there is a clear difference some 10k should they not refund that amount instead of half?

Scottish lizzie what do you think ?
Cheers

dunstonh

Seems fair to me. They are putting you in the position you would have been if you went down the repayment route originally.

If they gave you the full amount, you would have the surrender amount as as extra and that is not the idea. It is to put you in the same position only. What you decide to do now though is a different matter.

EdInvestor

Hello dibbs26

Their figures assume that you will surrender the endowment, pay the proceeds, plus the compo money into the mortgage to reduce its size, and then increase your monthly mortgage payment to include the amount of the monthly premium for the endowment.

If you do all that, your mortgage will be paid off on schedule and your outgoings won't increase.

dibbs26

Thanks for the reply dunstoh. Do you think I am better taking the compensation and paying it off my mortgage whilst also surrendering the endowment and paying that off the mortgage too ?. People I speak to say never cash in an endowment ........puzzled now

EdInvestor

Hi again dibbs, crossed post. Post some info about the endowment so we can check.

Company
Guaranteed sum assured
Total bonuses
Terminal bonus (if any)
Monthly premium
Maturity date

dibbs26

Hi Ed,
Will do, probably be tonight now....thanks for your help

dibbs26

Hi Ed,
Here goes with the info :
Company : Commercial Union till approx 2000, Now Norwich Union.[/B]
Sum Assured : £11,105[/B]
Bonuses : £3427.45 as at 2nd July 2004
Terminal Bonus : N/A
Monthly Premium : £47.15
Maturity Date : 7th June 2018

Many Thanks For Any Help !

EdInvestor

Hi dibbs

Right, your guaranteed value - the amount you will definitely get at maturity if you keep paying the premiums is 14,532.

This amount may go up a bit - about 1% a year maybe in extra guaranteed bonuses?

If instead you took the actual (surrender) value of 5,784 and put this into an account returning 3.5%, plus paid in all the premiums to maturity, you would end up with 18,305, which is quite significantly more.

If you used the money to pay off the mortgage, depending on what interest rate you are paying, the saving could be higher than at 3.5%.

The endowment does include free life cover, so if you need this, you should calculate the cost and deduct it from the bank savings total to compare.

Also - you never know - the endowment might mature with some terminal bonus component, if the stockmarket performs over the years and if this particular WP fund has a high investment in equities (does it?) If not, don't expect much extra because bonds offer lower returns, and you now have to pay for your guarantees.

If it were me and I was paying more than 3.5% interest on the mortgage, I'd cash in the endowment and use it and the compo to cut the mortgage size, and then increase the mortgage payment with the endowment premiums.

But then I would prefer certainty with my mortgage and I think there are more cost- effective ways of investing in the stockmarket than via an endowment policy.

But this is of course not advice and you should DYOR, and/or see an IFA.

Good luck

dibbs26

Thanks ed for your help....really useful.
Looking at 'TEP' compaines at mo !!

dibbs26

Just looking at the redress amount of £4897.87 and the actual surrender value of my endowment policy £5784.39, If I was to go with this it would mean that I have paid more in endowment premiums (over the 11 years it is £6223.80) and actually end up with a loss. The difference between the two is £1325.93, should the redress amount not include this loss too seeing as they have admitted to mis-selling the policy in the first place?
Cheers

dunstonh

dibbs26 wrote:

Just looking at the redress amount of £4897.87 and the actual surrender value of my endowment policy £5784.39, If I was to go with this it would mean that I have paid more in endowment premiums (over the 11 years it is £6223.80) and actually end up with a loss. The difference between the two is £1325.93, should the redress amount not include this loss too seeing as they have admitted to mis-selling the policy in the first place?
Cheers

That isnt how it works.

They would have looked at the position your mortgage balance would be in had been on capital and repayment mortgage. The redress is to put you in that position when the surrender value is included. So the £10,682 could be used to pay off part of the mortgage and switch to repayment. The redress is reduced by the cost of life cover over that period and at times a repayment mortgage would have been more expensive than an endowment mortgage so that is also taken into account.