Did your Advisor tell you Endowments are risky?

Crazy_Saver

I'm assuming this thread has probably run it's course as I have yet to have a reply from anyone who was given the correct advice from an advisor other than those who used members of their own family.

Thanks so much to everyone who has contributed.

Regards

Crazy Saver

Retired_I.F.A.

Thing is Crazy Saver your asking the crowd at the football match whats on tv.

Why would the vast majority who were correctly sold be interested in a thread about missold endowments on a board owned by a guy in the public eye who encorages claims?

dunstonh

I have to agree. Most of what you read on the forums is negative. It can be quite depressing at times. Especially if you believe that what happens on here is the norm.

And as I have said before, one word can make a difference between a valid sale and a mis-sale. "Could" and "Would". The endowment could pay a large lump sum at the end is acceptable. The endowment would pay a large lump sum at the end is not. How many can be sure 15 years or so after the event if they were told "would" or "could"?

treliac

It's back to the old chestnut, was someone told that their house 'would' or 'could' be paid for. A gamble on how much money you might have in your pocket at the end is one thing, but it's quite another when it comes to whether you 'would' or 'could' have your house at the end and I don't believe most people would gamble on that one.

Dick_here

The 'would' or 'could' relates to whether the endowment was going to pay out on top of the mortgage being paid off in most people's experience, I suspect. Generalising here, but people would not have bought endowments in the vast numbers that they did if they were sold them on the basis that they could, i.e. might be able to, pay off their mortgages with them. That was implicitly guaranteed, the sales focus was on the fact that you would/could have a lump sum to play with as well. Whether an implicit guarantee equals mis-selling though is the key question.

dunstonh

at the end and I don't believe most people would gamble on that one.

Your opinion but not one that sits with what happened. Remember perception of risk gets less after periods of good growth. We had seen decades of surplus payments but 2-3 times more than the endowments required. People were coming in asking for them or had parents telling them to take them out. The media and consumers association were telling people endomwents were best.

The perception of risk was very low. Rightly or wrongly. Combine that low perception of risk with mortgage payments that were lower than repayment mortgages and then you found large numbers went with that option.

You are also not risking your house. Most 25 year unit linked endowments are still expected to come close to hitting target or still pay surpluses. The shortfall figures for the majority in a shortfall position are actually quite low and even if you do end up with a shortfall of £5000, if it cost you £15pm less over 25 years then you paid £4500 less making just a £500 shortfall.

If you look at upheld mis-sale redress payments, a lot of them are actually in a surplus position and its only the fact that the surrender value is used rather than the current value that causes a redress payment to be made.

Combine that with projection rates that understate real returns and use values that are just after a major crash rather than maturity when they have had a chance to recover and things would not be as messy as it has been.

Merlot

dawnwool wrote: »

Bought an endowment in 1990 through a financial adviser, no mention of not paying off, just of a large profit at the end. My husband and I were a young couple buying our first house, had no financial knowledge so thought we were doing the right thing by going through a financial adviser. Now got a large shortfall on our endowment which will end 2016.

Same advice as well but from a Standard Life respresentative who came out to sell the policy to us in our home.

Sold the policies 3 years ago and recently got back £6000 back from SL after sending them one letter regarding misselling the policy.

Merlot.x.

Retired_I.F.A.

Royal life invented the low cost endowment and sold two kinds obviously I cant remember exact figures now but the quotes were akin to this..


LCE 1
£20,000 MORTGAGE 25 YEAR TERM
joint life male aged blah blah blah blah blah

MONTHLY PREMIUM..............................£ 27.20p
Gaurenteed sum assured on death......... £20,000
Gaurenteed sum assured on maturity...... £10,200
Reversionary bonus's *........................ £14.000
Terminal bonus**.............................. £10,000
Estimated maturity value...................... £34,200
Surplus after repayment of mortgage...... £14,200

*Reversionary bonus's shown assume continuation of our current declared annual rate payable throughout the term. Rates can and do vary however once declared a reversionary bonus is gaurenteed to be paid on maturity.
** Terminal bonus shown assumes our current declared rate applicable on an with profit endowment of £10.200 maturing today, note that terminal bonus is not gaurenteed and liable to vary considerably if any is paid at all.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LCE 2
£20,000 MORTGAGE 25 YEAR TERM
joint life male aged blah blah blah blah blah

MONTHLY PREMIUM............................. £ 29.50p
Gaurenteed sum assured on death......... £20,000
Gaurenteed sum assured on maturity(a).. £17,600 without profits
Gaurenteed sum assured on maturity(b).. £ 2,400 with profits
Reversionary bonus's *......................... £ 2.800
Terminal bonus**................................ £ 200
Estimated maturity value...................... £23,000
Surplus after repayment of mortgage...... £ 3,000

*Reversionary bonus's shown assume continuation of our current declared annual rate payable throughout the term. Rates can and do vary however once declared a reversionary bonus is gaurenteed to be paid on maturity.
** Terminal bonus shown assumes our current declared rate applicable on an with profit endowment of £2.400 maturing today, note that terminal bonus is not gaurenteed and liable to vary if any is paid at all.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx


The only people who ever bought LCE 2 were those that had a 100% mortgage. Lenders would give 95% Royal life the 5% on condition that a LCE2 was taken. Both were available to all but no one wanted a non profit endowment element. The piority for all those that had a LCE2 once in the property was to save enough to repay Royal Life's 5% and switch to a LCE1 type plan.

All that was in the quote except any reference to bonus figures was written clearly on the policies.

And they say millions were missold.:rotfl: Like hell they were.

treliac

Retired IFA, you've put a lot of work into this I imagine :T

Unfortunately it's way over the top of my head, all those figures, but it sure looks impressive.

Retired_I.F.A.

Read it slowly and it'll sink in Treliac. (it's kinda like the remote control for a tv kids suss it straight away, men take two mins and the pretty ones in the family take a year or two