Endowment confusion

leftieM

My husband and his sister bought 2 endowment policies in 1999, both for £28500, as they were buying a house together. I was considering bringing a mis-selling claim and have gathered all of the paperwork from husband and sil. One thing stands out - my husband in paying about 15% more a month into his endowment. Therefore, my sil received a 'red' letter 2 years ago whereas husband only got one last month.
Any ideas why this is? It seems odd that my sil should be investing less. I have asked husband and sil and they can't remember anything about it.

dunstonh

Endowments are a savings plan. They need to grow by X% per annum average to hit target over the term. That X% could be varied by the advisor. So a low target growth rate endowment would be more expensive than a high target growth rate endowment.

Only way to find out is to look at the original illustration or ask the providers what the target growth rate is.

There is also the cost of life cover. They would have different costs there as well.

leftieM

I considered the life insurance factor and can understand how this might vary the amount of the monthly premium. However it doesn't explain why there is obviously less being invested for my sister-in-law than for my husband (based on her endowment having a greater predicted shortfall). On paper they seem to be exactly the same policies (same guaranteed death benefit, minimum payment, target amount). They bought them off the same man at the same time.
Another thing - the guy sold them endowments that seemed to have, even in 1999, a lower return than if they had stuck the money in a bank account. Is this grounds to make a mis-selling complaint?

dunstonh

Rate of return isnt grounds for a complaint. Perhaps if he selected 11% per annum as a target growth rate compared to say, 4% target growth rate, you may have grounds as one is clearly more realistic than the other.

The lower the target growth rate, the more likely it would hit target. Do not mix up what we mean by lower target growth rate and lower return. They are two different things.

leftieM

I don't think they have a case to bring then. I think they were two naive people who wanted the lowest monthly outgoings so they went with the endowment-style interest-only mortgage. Knowing them, I'd be surprised if they even read the paperwork before signing, but that's their fault. It says that there might be a shortfall in the event of a stockmarket fall.

Ian_W

leftieM wrote: I think they were two naive people who wanted the lowest monthly outgoings so they went with the endowment-style interest-only mortgage. Knowing them, I'd be surprised if they even read the paperwork before signing, but that's their fault. It says that there might be a shortfall in the event of a stockmarket fall.

What a refreshingly honest comment, quite a change from "I never realised the Stock Market could go down" or "I didn't buy it cos it was the cheapest way to get a mortgage".

Just hope your hubby & SIL don't read post unbeknown to you!!

leftieM

Don't worry, I've ironed out hubby's bad habits (his money ones anyway!) He doesn't have the same impulse CD-buying habit he once had.....the joys of marriage!