Endowment Mis-selling

A question about : Endowment Mis-selling

My experience shows that persistance pays, don't be fobbed off.

In 1986, we were sold an endowment policy with UK's largest mutual by (then) UK's largest BS, now a plc. The Branch Manager (you had to get down on your knees for a mortage then), told us about how his brother had just cashed in big time with one, never suggested anything else, despite the fact it was my first mortgage.

In June 03 finally decided to complain and followed the Which Endowment Action guidance. In Nov 03, the aforementioned bank rejected our complaint, despite the fact they had destroyed all our records - we moved the mortage in 1994. They said the manager must have followed the correct procedures, and I had no proof he didn't.

I wrote to the FSA in April 04 and again in June after reading some of the advice on here about demonstarting our approach to RISK rather than HOW much money we stood to lose. FSA just kept saying they were to busy to allocate our claim to a case worker

Out of the blue last Friday got a letter from FSA saying that the bank has agreed with FSA that our claim was valid and will write with an offer within a fortnight.

After reading other posts on here I expect they will ask me how I want it calculating; at actual rates or based on their standard rate. I haven't got a clue about which will be most beneficial - despite the good advice on here.

But keep going despite any apparent set back.

Best answers:

• Glad your persistence stands to be rewarded.
  Our story is different. We were sold a Ј35000endowment in Oct 87. Having already provisonally agreed a repayment with our bank, we were persuaded to take out an endowment by the illustration showing a projected surplus of - no word of a lie - Ј55 000 after paying off the mortgage. We were in our mid 20s and financially naive. We'd never invested a penny in any policy ever, but the advice was persuasive, the saleswoman persistent, and we were taken in.
  About 3 years ago we were informed by Friends Prov (who had taken over our policy 10 years earlier) that not only would we not be receiving our promised surplus of Ј55000, but faced shortfall of Ј12000 on maturity.
  We were aghast at this paper loss of Ј67000, and switched the whole lot to repayment, giving ourselves just 12 years to pay it off so we'd be clear of debt by our 50s (when we'd be crippled by college fees etc). This meant our repayments are far higher than they would be if we'd gone for a repayment in 1987.
  We complained oto FP f misselling. They said we were missold but had suffered no loss (!!) so were due no compensation.
  We went to the Ombudsman, who has just agreed with FP's judgement.
  By my reckoning we will be hundreds worse off EVERY month till 2012, and are already thousands down since we switched to repayment 3 years ago.
  Of course we still have the payout from the policy to look forward to. A tidy sum, but no more (probably less) than if we'd stuck Ј50/month (the premium) into a BS for the same period.
  We feel totally ripped off!!
  To make matters worse, when FP demutualised we didn't get any shares, because our policy hadn't been taken out with them originally, and because the company they'd taken over 'was not a mutual' (FP's explanation). We have it in writing in our original policy that it WAS a mutual! The company was called National Mutual of Australasia!! So why haven't we been compensated with free shares for its demutualisation?!
  Any advice anyone?
• I think this is highlighted much of the problem with endowments.
  Firstly the projection is just that. It isnt a forecast. You were never going to get that amount. It was just an example of what you could get back if that rate of return had been achieved.
  The shortfall projection is again very similar. It shows how much you may get back if it grows at one of three rates of return. Most insurance companies do not include any terminal bonus accrued to date and many use the lowest value (ie surrender value) to project from. This is because some insurance companies dont have a current value to work from because their plan has a guaranteed minimum sum assured plus bonuses and the only daily value is the surrender value.
  So you were not facing a loss of Ј67000 at any time. The target was Ј35000 and using a projected growth rate until maturity you have potential shortfall of Ј12,000. However, that doesnt mean you are going to have a shortfall of that amount.
  It is common sense to budget for the worst case scenario but again its not a forecast but a projection.
  I have seen many endowments in the later years show shortfalls on the letters but the current values are higher than the sum assured which makes a farce of the whole system.
  Yours could be one with a guaranteed sum assured and uses a lower surrender value and the end result could pay out on target. Equally yours could be one of the plans that has no potential for future bonuses and 6% could be unachievable leaving you with a bigger shortfall.
  The likely reason you didnt get a payout is that back in the 80s and some of the 90s, endowment mortgages provided a lower monthly overall cost than a repayment mortgage. In addtion, you would have gained full MIRAS whilst it existed when you wouldnt have done on a repayment mortgage (decreasing balance falling below the max amount allowed).
  As for placing money in the building society, you are probably forgetting the cost of life cover which should be deducted from the premium and the remainder goes towards the savings element. The charges are taken off in the early days so an endowment should have a curved rate of return over the life of the policy rather than a level one. This is another reason why projections in the first 10 years of a 25 year endowment are pretty pointless.
  I'm not saying endowments are a good thing or that you didnt experience bad advice. I am just clarifying the issues which can distort the information you are provided and give reasons to them.
• Backbiter
  Thanks, but given my circumstances are not that different to your's, I'm not expecting much.
  DD
  20 years on and a lot more financially literate, I appreciate these were only projections, but like Backbiter that wasn't how the local manager of my BS sold it to us. Has anyone ever tried to sue for breach of contract? Suppose it depends on who the contract was with.
  I think I understand your points about the warning letters and projections. It seems we have swung from one extreme to another. My Ј40k endowment is now projected to hit either Ј28.1k (4%), Ј31.4k (5.75%) or Ј35.1k (7.5%). It is guaranteed to pay Ј27.4k (sum assured plus existing bonus's).
  Are you saying that this doesn't include any Final/Terminal Bonus? If so this seems as misleading and confusing as the original Ј80k projection back in the eighties.
  I appreciate (now) the final bonus is not guaranteed, but I undertsand St Life who I am with have historically paid a large final bonus, despite their declining performance in recent years.
• At least you lot can complain to someone and have a chance of compensation. In my early 20's I took out an endowment in 1985. We had a mortgage for Ј17k and I have the original letter showing that the endowment mortgage repayments were more expensive than repayment - but we would have a Ј17k surplus with the endowment at the end of the mortgage. Therefore we were told paying just Ј3.50 per month more would generate us a nice little nest egg if we went the endowment route. Well now Standard life tell us we will have a Ј3k shortfall!
  I tried the ombudsmen but because it's pre 1986 we can't complain. Wrote to my MP who passed it on to some minister responsible for the fiasco - received a letter saying hard luck basically.
  Can't have the company that sold it to me for bad advice as it was an Estate Agents (Parkhurst, Swansea) who no longer exist. I can't find out whether the estate agents occupying the premises now (Peter Allan - part of principality bs I think) took over the business or just the premises.
  Also have another endowment took out in 1995. I was a bit nervous as heard some bad rumours but was told it was the right thing for us as we had 1 endowment already and that was guaranteed to pay off mortgage!
  Now we have a potential Ј6k shortfall on a Ј35k mortgage. To address this I have taken out an ISA.
  I feel very aggrieved at the cut off point for the first mortgage especially when standard life send me warning letters with how to complain on!
• I always thought the cut off date was 1988 - but ignored it and complained anyway, without success.
  I hope you enjoy more success with your ISA than me. I was advised by my IFA to invest Ј7k in a Multi Isa in 2000. It's now worth barely Ј2k.
  These advisers are great aren't they?
• I took out a low cost endowment with Standard Life in 1991 and face possibly a 7K shortfall according to the last statement, do I take it that I may still be OK if St Life give you a Final Bonus?(matures 2011)
  Also does it look like we will get a windfall? if so when could it be, and any ideas of amounts?
  TIA
• Remember that some Standard Life endowments had a loose "pledge" to possibly make up some of the potential shortfall, subject to a range of conditions & circumstances being met
• So far my ISA ok. I pay in Ј100 per month to the following funds:
  Aberdeen Sterling Bond
  INVESCO perp corp Bond acc
  Fidelity Special Situations
  Artemis ABN AMRO High Inc
  started 3 years ago and currently valued at more than I have paid in.
  I decided to commit to it for another 2 years - my IFA advised going for a min of 5 years to get benefit but I have the option to cash in at any time. Hopefully I have bought low and if there is a big rise I will be a winner.
• by paying in monthly you benefit from "pound cost averaging"
  basically in early years - if you intend to continue with payments it potentially reduces the risk compared with a lump sum investment ( unless it just continues to fall all the time)
  Interesting fund choice/ split, but thats another story - already off original topic
• endowment- I am not going to defend someone else, but if you were explained and understood the risks correctly- on balance , at that time it might have been the option with better potential.
  ISA - not saying bad - likely well a researched complex fund construction, just surprised mix for the level of contribution- is that Ј100 each or Ј100 across all funds.
  What sort of charges are being applied?
• Just Ј25 in each. Actually picked the funds myself from safe to medium risk list provided by my IFA who knows I have an opinion on everything!!
  Charges:
  initial commission Ј3 for each Ј100 direct debit subscription
  servicing comission .500% +vat per year of the value of investment.
  new statement due soon. Value @ 1.4 Ј300 more than I paid in over previous 2.5 years.
  With regard to my endowments. I was definetely misold the first time being young naive and my only dabbling with investment at this stage was premium bonds and a bs account. I actually took on the endowment a year before I bought a house as the advisor told me this would shorten my mortgage term when I eventually bought. At no time was I informed there was a risk it would not pay off my mortgage. I am a cautious person and would have gone the repayment route if there was even the smallest doubt. Given that the repayment mortgage was the lower cost of the two it might have even been feasable to have had the repayment mortgage with an endowment along side for life cover and savings.
• Yeak Poppy
  I said
  Quote:
• I thought it was a strange mix too when i saw it. Nothing wrong with it but its a case of having funds at the two extremes of risk. Normally you expect a spread over the range. Nothing wrong with it, just unusual.
  Having a fund as risky as fidelity special situations that you chose, would have worked against you in an endowment claim as it suggests you do know something about risk.
• For anyone ou there thinking they haven't yet complained because it seems like a load of hassle....
  I complained via Which Endowment Action website (https://www.which.net/endowmentaction/index.html) which basically writes a complaint letter for you after you have answered a few questions. It also provides useful and practical advice.
  After completing a few more questionnaires from the lender, etc. my complaint was upheld and I was compensated for the shortfall.
  Give it a go, it's easier than you think, costs you a bit of time and a few postage stamps!