Endowment red letter day

fezza_2

I'll start at the beginning,
OH and I bought our first and only home in march 1993. It was a brand new housing development,with financial advisor on site ready to arrange mortgages etc.. Anyway took up offer of endowment mortgage and moved in at end of march 1993.
Origional policy started at that point.
Target amount 40,300
Payments 53.80 /month
Basic sum assured 11,929
Company commercial union maturity date 26/03/2018
value at 1999 14,999.55 great I thought on track
Norwich union took over in 2000
Value in 2004= statement 15,810.46 bonuses and basic sum assured
SV 6903.83 inc bonuses

Had amber letter in 2003 from NU showing may be shortfall.Projected shortfall at 4% growth was 9,900(Not in a position to deal with it financially due to severe ill health.)
Yesterday received first red letter and oh my goodness!!Projected shortfall at 4% growth now 16,500.
Now NU had only been paying 0.5% of existing bonuses and 0%on sum assured in 2003/4 this will increase to 1.5% for 2005.
Does this mean that the potential defecit is set to increase further??Wish I had a crystal ball.
Do I start making extra payments into mortgage account, I calculated that if I pay an extra 90/month into the interest only account for 10 years I will repay about 10,000 of the defecit.
Dont know if I have grounds for complaint for mis-selling.
Opinions on where to start dealing with this mess would be greatly appreciated.( NB not in a position to re mortgage as no proof of income due to ill health)

EdInvestor

Hello fezza

Don't panic

Can you ring them up and get an up to date surrender value, then come back and post it?

Also, would you need to replace the life cover if you surrendered the endowment policy?

If so, perhaps you could try getting a couple of quick online quotes to see roughly how much that would cost now, in light of your health problem.

fezza_2

Hi ed,
up to date surrender value is only 6903.83 with bonuses called them yesterday following the red letter.
Will look at life cover, but I am still awaiting more tests at the hospital, was expecting to be signed off the books last month, but my optimism was in vain. Potentially another major op in the next six months whoop de doo!! So life cover I think will be more expensive than the endowment payments.
I did have mortgage protection insurance that paid the interest for a year and I continued to pay the interest as normal , so have brought mortgage down to 38000.
Did look at repayment mortgage for 38000 over 15 years, and payments will be as cheap as me over paying current mortgage at 90 pound a month with the advantage that the whole house will be paid for at the end of that term.
OH gave up work due to my ill health and is currently retraining. All being well by middle of october he will have completed training and will find work so may be in a position to remortage by end of year.Everything crossed.
May try a letter of compaint to IFA who sold us the policy as I have no details of the fees and charges of the initial policy when it was taken out in particular surrender values and charges for the first five years when it was with cgu.
Since they were taken over by NU I have not received any policy details other than the yearly statements and the amber and red letter.
Should the policy remain the same?
As you can tell feel a bit calmer now,have got used to life throwing a lemon every now and again, just trying to find the best way of opening the tequilla!! lol

fezza_2

The plot thickens, just did a search to check that the IFA were still in business only to find that they went into liquidation last april. Have phoned the liquidators to find out where I stand, awaiting reply.

dunstonh

The plot thickens, just did a search to check that the IFA were still in business only to find that they went into liquidation last april. Have phoned the liquidators to find out where I stand, awaiting reply.

They will probably tell you to lodge the complaint via the FSCS. (!!!!!!, thats more money I will have to pay for other people's mis-selling)

EdInvestor

Fezza,

Will have to get back to you tomorrow on the valuation as the calculator site is down.

Did look at repayment mortgage for 38000 over 15 years, and payments will be as cheap as me over paying current mortgage at 90 pound a month with the advantage that the whole house will be paid for at the end of that term.

If you can afford switching to repayment it would probably be best.Then the endowment can be looked at as a savings/life assurance policy,which given your health could be more sensible.I'll get back to you asap on the figs though.The policy should remain the same.


For the complaint, you probably need the Financial Services Compensation Scheme:

https://www.fscs.org.uk

To check grounds for a misselling complaint

https://www.endowmentaction.co.uk

FOSman

Another FSCS case? You need to check if the adviser was a sole trader, partnership, or a limited company.

If the latter, then FSCS is the way to go, but they will still be investigating your case before agreeing any compensation.

If not a Limited company, then the principle of the IFAs, or the partnership, is/are still liable for a mis-sale. Find out, or if you like, post the name of the IFA, and I'll check for you tomorrow with the FSA.

EdInvestor

Fezza

If you took the surrender value and put it in the bank @4% for 13 years, also paying in the premiums, you would end up with 22,502, compared with the comparable guaranteed value of 15,810.

That's rather a big difference.

Now the policy might do better than that, it might deliver an additional terminal bonus, who knows?

But if you have alternative life cover and if you would like more certainty, you might do better to cash in the policy and use the S/V to reduce the capital owed on the mortgage, switch to repayment and divert the endowment premiums to reducing the mortgage as well.

At least you would know where you are.

Any compensation for misselling could also go to paying down the mortgage, so if you decide to claim and to switch mortgages, make sure there are no penalties for overpaying.

Good luck with the health problems, hope things improve in future.

dunstonh

If you took the surrender value and put it in the bank @4% for 13 years, also paying in the premiums, you would end up with 22,502, compared with the comparable guaranteed value of 15,810.

Hold on, you are comparing 4% growth on one side with no growth on the other. It will obviously have a big difference.

If you surrender, you lose the life cover (and CI and waiver if applicable). That may be more valuable to you at this time.

Allocation rates, charges, fund availability, surrender penalty free dates would also need to be investigated before any decision to keep, surrender or make paid up is made (in addition to other things already mentioned).

fezza_2

Good morning all, and thanks for your replies.
Still waiting to speak to liquidator, called the FSA helpline, just an automated service but getting them to send me a guide to making a complaint anyway.
Fosman to answer your question the IFA was BErry Birch and Noble Financial services Ltd. They are owned by a solvent company Birkley Berry Birch and still trading.
Now BBN FS Ltd has transferred its assets, advisors and customers to a subsiduary Berry Birch and Noble Financial Planning.
But its liabilities - including any compensation due to investors who were mis-sold products such as precipice bonds, endowments or pension plans - have been left behind with the defunct firm.

I am trying to find out where I am in this, as I have not yet complained,was I transferred to the new company, or did they dump all endowments customers in the liquidation pile expecting the worst and leaving the good guys to foot the bill??

Dunstohn,
At the moment, I am keen to keep the life cover that the endowment offers us. I will try to get the details that you outline above.
I had considered going to an IFA when I got the red letter, but considering that now I feel that BBNFS were an IFA and didn't have my or many other peoples interests as their first concern, I am very wary of any advice that I may receive.
The usual story of a rotten apple spoiling the barrel Im afraid.

dunstonh

Fosman to answer your question the IFA was BErry Birch and Noble Financial services Ltd. They are owned by a solvent company Birkley Berry Birch and still trading.
Now BBN FS Ltd has transferred its assets, advisors and customers to a subsiduary Berry Birch and Noble Financial Planning.
But its liabilities - including any compensation due to investors who were mis-sold products such as precipice bonds, endowments or pension plans - have been left behind with the defunct firm.

Phoenix firm and a high profile one at that.

I had considered going to an IFA when I got the red letter, but considering that now I feel that BBNFS were an IFA and didn't have my or many other peoples interests as their first concern, I am very wary of any advice that I may receive.
The usual story of a rotten apple spoiling the barrel Im afraid.

Get a local small IFA to come out and see you. They are less likely to have the flash software and equipment of the big firms but they are less likely to have the sales mentality of them either. IMO, large IFA firms are just like the old tied agent sales firms.

Because of companies like BBB, I am having to pay £1880 a year to cover their complaints. My company is complaint free so you can imagine how I feel having to pay that money to cover companies like that. Lots of other small IFAs feel exactly the same way.

The usual story of a rotten apple spoiling the barrel Im afraid.

I never understand that mentality though. If you applied it to all areas of life, you wouldnt go anywhere or do anything. You got your advice from a "supermarket" before and didnt like it. Now try a corner shop. Some supermarkets are better than others as are some corner shops. You dont stop eating food though if you go to one bad shop.