Taking endowment complaint to Court

Hi,

As someone who also fell foul of this pre 1988 ruling I thought I’d share a snippet of interesting yet useless information I just recently came across. It is on a page from the Daily Mail dated September 1984 under their Property Mail section headed “Mortgages made Easy” by David Lewis (Executive Editor – Money Mail).

The item mainly refers to mortgage availability and how much providers are prepared to lend based on earnings etc. It also highlights the high interest rates at the time from 12% up to 15%. However, the bit that interested me most was a section relating to the different options, repayment and the good old endowment. And I quote “You can take an endowment mortgage where you pay interest only to the lender but also pay premiums on an endowment life insurance policy which repays the loan in one lump sum after 25 years”

It then finishes on “For a first time buyer though there is no point in paying more to have an endowment mortgage which gives you a lump sum when you are middle-aged and probably don’t need it”! Chance would be a fine thing – how naïve we all were, even those in the know, apparently.

This little article, to my mind, clearly shows how everyone was oblivious to the potential risk/gamble around that time but still, I firmly believe those that sold and/or provided these endowment policies at that time, especially prior to 1988, should be held responsible for selling the policies on what turned out to be false pretences and therefore ought to honour the original premise that the mortgage would be paid off! :mad:

John

Hi Ed-Investor,

Yes, I know that is always going to be the argument, to compare growth of the house value versus the performance of an endowment and it's likely the house price exceeds the endowment shortfall in percentage terms. There's also the point that one should have continued to invest the money saved through lower interest rates on the mortgage but....

1. House - The money made on the house is not going to be available some time unless we sell and downsize considerably (ie to a mobile home or canal boat - which I have considered) as stated on previous post.

2. Interest rates - In reality we have always been on a tight budget and any savings on the mortgage immediately covered other expenditures, besides, you don't expect to have to re-invest in an product that you are already investing in which is supposed to pay off your mortgage do you?

Yes it's nice to know we have high equity behind us with the house at least for our children but to be honest, I wouldn't of minded it being less if it was the same for the rest of the property market especially if it mean't our endowments paid off our mortage and that prices weren't so ridicuously high for first time buyers. The only people who are winning in this situation are those with multiple properties that keep coining in money from letting to the poor sods who now can't afford the huge mortgages that they now require.
It's a perpetual cycle, especially as the government then tries to build affordable housing which is then probably bought by those same multi-home owners who have more money to invest and to take out buy to rent mortgages etc But that's another bug bear of mine.

I count my blessings on that score but it doesn't alter my opinion that endowments were widely sold on the understanding that they would pay off your mortgage after 25yrs or whatever, as stated quite clearly in the Daily mail all those years ago. The fact is I have got to find about £12,000-14,000 to pay off my £46,000 mortgage - Small potatoes perhaps by today's standards but a humungus amount for me (us).

Cheers
John

Oh yeah, thanks, that makes me feel a whole lot better! It's quite funny in a way how a situation like this can be viewed so differently - I just can't put my finger on why that is?

John

John G

As I recall you have an RSA/Phoenix endowment, so I can understand that you are somewhat miffed - I suspect shortfalls of the size you mention will be pretty rare for policies of that age elsewhere. Do you need any help on what to do about it, or is it already sorted as far as possible?

We were always advised that Unit Linked policies were more risky whilst "With Profits" were safer?).

Thats the sort of quote I have heard from tied agents so many times in the past. Particulary those with only with profits funds available trying to give themselves an edge over another advisor. It is so wrong and just shows how inexperienced that person was (or how dodgy they perhaps were).

You may also recall not only have we lost on these RSA Endowments but also on my Equitable (WP) Pension - I've stopped paying into the pension now and ever since can't bring myself to sort out another one as I just can't trust any of them quite frankly. I mean, why pay into something which might just disappear into a black hole or more likely someone elses pocket?

Its not the pension. Its the fund. The product is totally fine.

Regarding our RSA/Phoenix endowments - I did consider the idea of cashing them in but quite honestly I have lost all confidence in anything to do with them one way or the other so rather leave them and hope for the best now.

Don't bury your head in the sand with this. You really do not want to sit back and hope for the best with a Phoenix endowment. It will not get better. It will get worse. OK, I cannot say that as a certainty but its a close to that as we can get.

I know you have had your fingers burnt with the pension and endowment but if you dont want to make changes yourself, see if you can find a good IFA with a good reputation who could sort the mess out. Speak with family and friends and see they have an IFA they deal with. Particulary long standing relationships. Any IFA who has been seeing the same families for 10 years, for example, has to be doing something right and if they did something wrong.