Endowment compensation - Assumptions

jaypr

Hi,

Just received a compensation offer from Standard Life, but according to the offer letter they have used "assumptions" in thier calculations. The assumptions being;

The lender was the Halifax - the agent was Halifax Property Services but the lender was actually N&P taken over by Abbey National. We completed a mortgage questionnaire for Standard Life in which this was stated.

The interest rate was the standard variable rate for the lender - we had a fixed rate for 5 years during which time the SVR was lower. All the details of the fixed rate and subsequent interest rate changes were provided to Standard Life.

My question is, will these assumptions have affected the amount of compensation they have offered and is it worth querying, or do we just take the money and run.

Cheers, Jason

TrickyTrotter_2

The short answer is yes it would have affected it. Whether the asssumptions are to your benefit or not is anyones guess really.

There are a number of old threads (circa 12 months ago) on here where various posters have claimed to be able to know the answer, but I don't think there was ever a definitive answer. Don't know how far the archive goes back, but may be worth a search. I chose the assumed variable rate option after reading them, but I am still non the wiser whether I lost out or not.

What SL should have done was to ask you wheter you were willing for them to assume a variable rate mortgage for its life, or whether you wanted it based on your actual mortage rate.

FOSman

I would just accept it. It shouldn't make a significant difference as the interest rates are applied to both sides of the calculation. If you do ask them to use the correct rates and what they calculate is actually less than what you have been offered, then you will have to accept the new offer.

But just to give you an idea, if the interest rate they have used was higher than the
rate you paid, then the assumed capital you would have paid off had you taken a repayment mortgage would now be greater than it should be. Therefore, when they compare that sum to the surrender value of your policy, it will give a bigger difference, and more redress. This is just a rough educated guess, but I'm sure someone else will correct me if I'm wrong.
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