Endowment policy not used for mortgage purposes

kimmi

Hi
I wonder if anyone could give me some advice?

Before we met, my husband was sold a CIS endowment for £15000 , paying £23.70 a month, in Sept 1990. At the time his wages meant he was in no position to buy a house. He was then approached by CIS again in 1993 and took out an additiion endowment for £20000, paying £39.90, maturing in the same year as the other one.

He's just received 2 Red alert letters from CIS. The £15000 at best will have a shortfall of £300 (7.5% growth) and worst £4300 (4% growth). The £20000 policy at best will have a shortfall of £1200 (7.5% growth) and at worst £6000 (4% growth).

He's written to complain he was missold and been sent a questionnaire to complete. Only a few questions are relevant though, because he's never actually had a mortgage to buy a house. In 1996 he moved into a house tied to his job, although pays rent etc, so buying a house wasn't top of his list of priorities. He's continued to keep up to date with his premiums though.

My question is, will his complaint be taken as seriously because the endowments are only being used now for savings purposes? When he was sold the first one, the salesman knew he wasn't in a position to buy a house and again when the 2nd one was sold. Also as he had no dependents, the life assurance cover wasn't required (and the salesman also knew his company pension would have this). I feel that if he'd invested in TESSA's (which the salesman must have known would be available in April 1991) or something similar, his money would be worth a lot more know than the endowments.

Sorry this post is so long, but I hope someone can help or give some advice!


Regards
Kimmi

dunstonh

It depends on the documentation as to how this is dealt with.

If it was sold as pre-endowment mortgage. i.e. take it out now and when you get a mortgage, you would have covered some of the years already, then there is a good chance that will be the area the complaint is upheld. Most likely outcome if upheld is return of premiums plus interest.

Investment performance itself is not grounds for complaint. Many endowments over the same period have outperformed building society accounts (inc Tessa), many havent. Its not the endowment that has failed, it is the investment fund it is invested in. The CIS With Profits fund has limited growth potential based an asset mix and charges and is likely to be closer to the 4%pa figure than the 7.5% figure.

kimmi

Hi
thanks for your quick reply.

When my husband was sold the first policy it was on the understanding that it could be used for mortgage purposes at a later date, so I guess he may have a case.

I now have another question though! When you say he could have a return of premiums and interest, would that mean they would calculate the interest the money would have earned as savings or the bonuses the premiums have earned to date?

Hope you or anyone else can help!

Kimmi

dunstonh

I now have another question though! When you say he could have a return of premiums and interest, would that mean they would calculate the interest the money would have earned as savings or the bonuses the premiums have earned to date?

In a case where the product was inappropriate (like this), it is dealt with differently to a mis-sold endowment (when repayment mortgage should have been done).

The policy will, in effect, be voided and you can forget the bonuses etc. It will be a straight refund of what you have paid in plus interest that would have been earned (which is then taxed).

Before you complain, just make sure that the plan isnt worth more than has been paid and look at the bonuses.

Your compliant may be valid but ironically, it may cost you more than sticking with the plan or making the plan paid up or surrendering the plan.

EdInvestor

Hi kimmi

What kind of endowment is this?Is it in with profits orsomething else?If you'd like some help on what to do with it, post the following info:

Guaranteed sum assured
Bonuses so far
Monthly premium
Maturity date
Surrender value

Or, if it's unit linked

Surrender value
Fund it's invested in

While the endowment may be missing its target, this doesn't always mean it's a bad investment,as DH says

kimmi

Hi
thanks for your reply. Don't have the surrender values yet, but the rest of the info is as follows, both policies are "with profits":

1)Target amount £15000
Basic sum assured £6435.00
Bonus so far £2953.81 (latest letter dated Jun 2005, said bonus rates declared on 1 Apr 04)
Monthly premium £23.70
Maturity Date Sept 2015

2) Target amount £20000
Basic sum assured £9560.00
Bonus so far £2799.12 (as above latest letter dated Jun 2005, said bonus rates declared on 1 Apr 04)
Monthly premium £39.90
Maturity Date March 2015

Have just sent letter to CIS asking for surrender values and to confirm the Bonus to April 2005.

Hope you can work on this without the surrender value

Regards
Kimmi