Mortgage Protection - RBS requirement

I had a mortgage with the Halifax from 1982 to 2003. I was advised at the outset from Halifax that I needed mortgage protection insurance though I have no written evidence.

Lenders required life assurance on mortgages until the mid to late 90s. There were a few stragglers into the early 2000s. Rarely see it as condition of borrowing today apart from commercial borrowing/mortgages where it is still often required. A condition of borrwoing requiring insurance is allowed under past and current rules.

I remortgaged from Halifax to RBS in in 2003. I was advised by RBS staff at the set up that I needed Mortgage protection insurance. I have a letter of acceptance for the mortgage from RBS saying;

"We take this opportunity or reminding you of the following important points:
* You must ensure that your life assurance covers you for the full amount of your facility and for the full term"

That may just be an instruction to remind you that your life assurance may need changing to reflect the new amount being borrowed. That doesnt mean it was mandatory. However, if it was mandatory, then you cannot be missold.

Throughout these years I had excellent death in service benefits with my company pension that would have paid a lump sum sufficient to pay off the loan in the event of my death plus, my wife would also receive a half pension in the event of my death and she could have continued the payments with out a problem. In addition I had 12 month sick pay benefits (6 full, 6 half pay) This protection was clearly not required.

Death in service is totally irrelevant and can be disregarded even when it is not a condition of borrowing.

Death is service is a relatively small payment which is designed to go someway to reduce the impact of lost pension entitlement (if based on years of services, the spouse gets 50% of say 20 years instead of the 40 years it may have been had you not died). It also helps on short term loss of income. It is not designed to cover debt and is rarely anywhere near enough for a married couple. Sick pay has no overlap with life assurance. So, again, irrelevant.

* Was this requirement to have mortgage protection insurance valid or have I been mis-sold the product?

If it was mandatory, it cant be missold.
If it was not mandatory, nothing you have said suggests that it was wrong to have it.

The RBS protection was bought through a broker from Friends Provident. I cannot determine if I was directed to the broker by RBS but, it was on RBS's requirements that I entered into the policy. If a claim is valid who is responsible for my situation?

As you used a broker and did not buy through RBS, RBS has no liability for the product you bought. The broker would either have acted on instruction only (if you told them what you needed and they put that in place) or advice (where there did a shortfall analysis and recommended a solution to fill that shortfall.

This effectively ends any complaint you where thinking about making to RBS. RBS retailed its own product. It did not use third party broker/advisers.

* On transferring my mortgage back to the Halifax in 2004 I maintained the policy as I had previously been advised by Halifax that it was a requirement although only verbal. Do I have any cause for claim against the Halifax?

It was a requirement in 1982. It was not a requirement in 2004. You have no complaint against Halifax for something that was the case 22 years earlier but not then.

Going back to the RBS, if you had placed the business through them, they would be liable for the advice they gave. So, even if they told porkies about it being required when it wasnt (as being required is allowed. Telling you its required when it is not is a wrongdoing), there will almost certainly be no evidence of this allegation. So, a complaint would look at whether you needed life assurance or not. DIS is stripped out of the equation. So, it would look at what other life assurance you had and your needs. Typically a ballpark figure is the amount of all your debts plus 10x to 20x your income. If you are under that ballpark, your complaint would usually be rejected.

However, in summary:
1 - Initial Halifax sale was fine. You did need it as condition of borrowing back then. Not missold.
2 - RBS may or may not have needed it. However, by not buying their product, you can not complain to them.
3 - Halifax didnt need it in 2004 but you didnt buy anything from them. Not missold.

I must correct you on your opinion about the death in service payments due to me and the pension my wife would receive as my widow. You will understand that I do not wish to post figures but I can assure you that my death in service benefits were always more than sufficient to pay off my mortgage owed to the RBS and, indeed, would have left a healthy balance of this death benefit to my wife on top of a widows pension of 2/3rds of my pension at the time of my death.

Its not so much my opinion but what is expected and considered as suitable advice and what the FOS position would be. Most Death In Service (DIS) is no more than 4x salary. So, when a family without children is around 10x plus debts or family with children 20x plus debts, you can see that 4x DIS is quite a bit short of that figure.

Also, pension entitlement grows annually. Your wife may have got 2/3rds of your pension at death but your pension worth, based on years of service, is worth much more after say 40 years service than say 10 or 20 years. If you were on an 80ths scheme, for example, if you died after year 10, she would get 2/3rds of 10/80ths. If you died after 30 years it would be 2/3rds of 30/80ths. There are many different schemes and variations but I am just going by typical at this point.

So, the DIS may have paid out enough to cover the mortgage but would your wife, at point of sale (not later) have got enough pension to provide an income that she could rely on without shortfall? Point of sale being the key date. Not what your later pension entitlement was as it does get better as you get older and the need for life assurance goes down (or goes away fully).

It is for this reason that I felt the requirement for a mortgage protection policy was invalid and is the source of my basis for a claim against RBS. Like I say, I will still consider a claim against RBS for insisting on this requirement - after all they can only say no.

There are two problems here:
1 - If it was mandatory to have. It was not missold. It doesnt matter what alternative cover you had. If it was a condition of borrowing, then it cannot be missold.
2 - If it was not a condition of borrowing but a lie (quite possible) but you bought elsewhere, the bank only has liability for the products it arranges. Not those that are bought elsewhere. So, if you bought via a broker/third party, RBS would not carry the liability.

You may recall the endowment issues in the past. If someone followed the Which? recommendation and bought following their advice instead of the lender product, they were unable to complain about them. The business has to transact via the agency of the bank (or tied company). So, those told to get an endowment but decided not to use the bank but use Which?'s recomemendation lost the ability to complain. We are also seeing that with PPI complaints too. We had one on the board recently who followed Martins best buy list and bought direct after being told "he had to have it". it was a lie he had to have it but as he didnt buy via them but bought elsewhere, there was no liability.

I have to say that financial advice is not infallible . Upon retirement in 2009 and when seeking advice from an IFA regarding investing my retirement lump sum, the IFA (from Skipton) suggested I should consider some life cover in the event of my death. When I told him that, should I die within 10 years of retirement, the pension available to my wife would rise by £9,000 per year and then fall to 2/3rds of my full pension until her death he told me I was incorrect. I had to show him my pension documents to convince him. That increased pension on my death ends in December 2019 so I am still keeping an eye out for roller skates on the stairs, etc.

Nothing is infallible. Banks and building societies were the training ground for new advisers. In fact, if you were to look back on this site at posts from the early 2000s from people asking about becoming advisers, they would be told to look at the banks as they pay for the training and you get to make your mistakes on bank customers without any personal liability. Then when you are ready, you can move on and become directly authorised where you are personally responsbile for your advice (and I can tell you that it makes a difference to the quality if you know you are the one on the hook for it). Skipton had a sales process that mirrored the tied agents and their advisers had sales targets. An IFA is not really independent when they have an employer calling the shots and telling what they can or cant do. Indeed, the IFA classification was changed in 2013 and many pre 2013 IFAs are no longer IFAs but just FAs as they couldnt meet the new classification.

My posts here are not to put you off but more to make you aware of the issues. If RBS did sell that policy themselves, then a complaint will not find any evidence that you were told it was mandatory if it wasnt. So, they will then turn to suitability and you can see from my post that the level considered appropriate is very different to how others would view it. If RBS did require it then it cant be missold.