Cut old people's benefits, they'll die soon anyway

[sidicks]

RYH64E said:

I'm not having a dig at financial advisers, the point I was trying to make was that it was a different world back then, people didn't have access to the information sources we take for granted today,

No, but the information was available in product literature - that's my point.

RYH64E said:

double digit interest rates were the norm, inflation rates had been as high as 18% as recently as 1980, and there was nothing like the levels of consumer protection that are in place today. Endowment mortgages were the norm, I had one, my parents had one, those of my friends who owned houses had one, they were the default choice and an easy sell (cue someone coming along who didn't have one).

Indeed, and when inflation is 10%+ then interest rate of 12%+ are likely / plausible expected etc. Certain people appear to be unaware of how massively the investment landscape changed son after this time (and the adverse impact this had on investment returns). They also conveniently forget the positive benefits of that low interest rate / inflation environment.

RYH64E said:

On the flip side, house prices were cheap as chips, I might have lost a bit of money on endowments (that I cashed in 20 years ago) but the bigger lost opportunity was not borrowing more to invest in London property (that I stupidly thought was over valued at the time).

Lost money or didn't make as much as you'd hoped?

Edited by RYH64E on Sunday 11th October 09:39

[RYH64E]

sidicks said:

Lost money or didn't make as much as you'd hoped?

I cashed in two endowment policies in the mid 90s and neither paid back even the amount of money that I'd paid in, so lost money on those. On the other hand, I've still got one of the London houses that I bought with an endowment mortgage in about 1990, not selling when I traded up was one of my better financial decisions .

[sidicks]

RYH64E said:

I cashed in two endowment policies in the mid 90s and neither paid back even the amount of money that I'd paid in, so lost money on those. On the other hand, I've still got one of the London houses that I bought with an endowment mortgage in about 1990, not selling when I traded up was one of my better financial decisions .

But to be fair, this was before the markets had fully recovered from the 1987 crash, and had you waited a few year, you would have benefited from the strong gains in the mid-late 1990s...?!

[Welshbeef]

anonymous said:

[redacted]

However when all is said and done those £50k houses they bought with endowments in the 1080's are worth what £750k+ today so the mortgage debt is tiny and of no issue to anyone.

[sidicks]

anonymous said:

[redacted]

Indeed - what people commonly refer to as an 'endowment policy' is, strictly speaking, an 'endowment assurance' which is a combination of a 'term assurance' (which pays a lump sum on death within the policy term) and a 'pure endowment' (which pays a lump sum on survival to the end of the policy term). The lump sum amounts might be fixed or linked to investment markets (or a combination of the two).

Of course those with payments linked to the underlying investment markets had upside potential but also downside risk...

[sidicks]

Welshbeef said:

However when all is said and done those £50k houses they bought with endowments in the 1080's are worth what £750k+ today so the mortgage debt is tiny and of no issue to anyone.

Apart from those who choose not to understand?!

[Rovinghawk]

What occurs to me is that endowments/house purchases & the whole situation involved with them is probably the biggest financial issue that anyone will ever get involved in. Based on that, surely the individual should accept their responsibility to learn a little about it so as to go in with a little bit of knowledge?

I'm no financial expert but before buying a house I made sure I had a pretty good grasp of how markets/endowments/financial products worked. This was gained by going to the local library & reading up on the subject- my understanding is that libraries were/are available to pretty much anyone.

Even those incapable of going to a library should be capable of reading the forms they signed. Those not capable of this shouldn't be allowed to get involved in financial transactions.

I believe that for every case of mis-selling (I accept that this happened on many occasions) there were at least ten cases of mis-buying.

[sidicks]

Rovinghawk said:

What occurs to me is that endowments/house purchases & the whole situation involved with them is probably the biggest financial issue that anyone will ever get involved in. Based on that, surely the individual should accept their responsibility to learn a little about it so as to go in with a little bit of knowledge?

I'm no financial expert but before buying a house I made sure I had a pretty good grasp of how markets/endowments/financial products worked. This was gained by going to the local library & reading up on the subject- my understanding is that libraries were/are available to pretty much anyone.

Even those incapable of going to a library should be capable of reading the forms they signed. Those not capable of this shouldn't be allowed to get involved in financial transactions.

I believe that for every case of mis-selling (I accept that this happened on many occasions) there were at least ten cases of mis-buying.

Something I've alluded to previously.

[RYH64E]

sidicks said:

But to be fair, this was before the markets had fully recovered from the 1987 crash, and had you waited a few year, you would have benefited from the strong gains in the mid-late 1990s...?!

For those of us blessed with hindsight rather than foresight it's never easy to get the timing right...

[sidicks]

RYH64E said:

For those of us blessed with hindsight rather than foresight it's never easy to get the timing right...

It wasn't a criticism! Just supporting my previous comments to another poster that long-term investments have upside and downside risk and suggesting that the 'product' was wrong purely on the basis of hindsight suggests a fundamental lack of understanding about the investment markets.

[Sticks.]

sidicks said:

Welshbeef said:

However when all is said and done those £50k houses they bought with endowments in the 1080's are worth what £750k+ today so the mortgage debt is tiny and of no issue to anyone.

Apart from those who choose not to understand?!

That's a broad generalisation. The place I bought in 86 for £50k in commuting range of London is worth about £240k now. I sold it in 93 for £55k, during the downturn.

When did the mortgage warnings start?

Just for perspective: I was sold two endowment plans in 1980. They're currently worth @ 20% of the projected value in 2 years time (at 1980s value of the £).

[Welshbeef]

Sticks. said:

sidicks said:

Welshbeef said:

However when all is said and done those £50k houses they bought with endowments in the 1080's are worth what £750k+ today so the mortgage debt is tiny and of no issue to anyone.

Apart from those who choose not to understand?!

That's a broad generalisation. The place I bought in 86 for £50k in commuting range of London is worth about £240k now. I sold it in 93 for £55k, during the downturn.

When did the mortgage warnings start?

Just for perspective: I was sold two endowment plans in 1980. They're currently worth @ 20% of the projected value in 2 years time (at 1980s value of the £).

So let's make an assumption you put 10% down so at most your endowments would have been for £45k.
You say they are worth 20% of the projected value then so again assuming you never moved you'd have a what £35k Ian problem.

Looking at your current fleet you could possibly get £20k for them on a good day so you only have a £15k issue.

Buttons. ESP I ally as you have stated those houses are now 5x the price you paid.


Lastly weren't endowments a cheaper option over repayment based upon projected outcome so the gap doesn't really exist as you didn't pay it in in the first place.

Edited by Welshbeef on Sunday 11th October 11:09

[Rovinghawk]

sidicks said:

Something I've alluded to previously.

With respect, you are inside the profession & can therefore be accused of bias.

Coming from a layman/outsider the comments might carry more weight.

[sidicks]

Rovinghawk said:

sidicks said:

Something I've alluded to previously.

With respect, you are inside the profession & can therefore be accused of bias.

Coming from a layman/outsider the comments might carry more weight.

To be clear, I am inside financial services but far removed from being a 'financial advisor'...!

[Sticks.]

Welshbeef said:

So let's make an assumption you put 10% down so at most your endowments would have been for £45k.
You say they are worth 20% of the projected value then so again assuming you never moved you'd have a what £35k Ian problem.

Looking at your current fleet you could possibly get £20k for them on a good day so you only have a £15k issue.

Buttons. ESP I ally as you have stated those houses are now 5x the price you paid.


Lastly weren't endowments a cheaper option over repayment based upon projected outcome so the gap doesn't really exist as you didn't pay it in in the first place.

Edited by Welshbeef on Sunday 11th October 11:09

My point was your 7x multiplier was unrealistic in many cases. The endowment example was for the perspective of what people were told at the time, that's all.

£15k's a lot for some people, perhaps having supported their yoofs through uni, and post redundancy, maybe only able to work p/t or on min (standard) wage or zero hours - for example.

Btw thanks for leaving me carless, you're not a financial adviser are you?

Eta from memory, endowment mortgages were more expensive than repayment mortgages per month because of the insurance premium (life assurance) but 'worth it' as they were 'with profits' so 'you'd get a lump sum of could pay it off early'.

Edited by Sticks. on Sunday 11th October 11:27

[sidicks]

Sticks. said:

My point was your 7x multiplier was unrealistic in many cases. The endowment example was for the perspective of what people were told at the time, that's all.

At the time, based on projections in a different economic world.

Sticks. said:

£15k's a lot for some people

Not a lot compared to the increase in house value you experienced (which was the flip side of the changed investment outlook! You can't complain about one aspect with acknowledging the massive positives elsewhere!

Sticks. said:

, perhaps having supported their yoofs through uni, and post redundancy, maybe only able to work p/t or on min (standard) wage or zero hours - for example.

None of which are even vaguely related to the endowment...

[Sticks.]

Quotes too mess Sidicks but in order.....

Yes, projections based on past performance, and no reason to doubt it at the time. I may have the paperwork somewhere.

£15k in practical terms is hard to find for many people was my point. Yes, there are positives and negatives for every generation,

Not relevant to the endowment, but the thread theme 'everything's easy for them' (by some).

[sidicks]

Sticks. said:

Quotes too mess Sidicks but in order.....

Yes, projections based on past performance, and no reason to doubt it at the time. I may have the paperwork somewhere.

The same paperwork will explain how the figures are just examples and the amounts are NOT guaranteed and you may get back more or less than the projected amounts...

Sticks. said:

£15k in practical terms is hard to find for many people was my point. Yes, there are positives and negatives for every generation,

Given 10+ years of warning about a shortfall then this shouldn't have been such a big surprise / problem!

[Sticks.]

sidicks said:

Sticks. said:

Quotes too mess Sidicks but in order.....

The same paperwork will explain how the figures are just examples and the amounts are NOT guaranteed and you may get back more or less than the projected amounts...

Given 10+ years of warning about a shortfall then this shouldn't have been such a big surprise / problem!

I'm sure it did say that. And I'm sure the salesman would've said not to worry about it, because there hadn't been any reason too. If it was just about what was written down, what point the salesman? (the clue's in his title). My point is that everybody had faith in it at the time, salesman included. Hindsight is wonderful.

Agreed re warning.... if everything in life goes to plan. Which when you're younger you're sure it will but as you get older you realise for some it doesn't.

Much as it's interesting to think back about how we viewed property, lending etc, it's a sunny day and there's a chance of seeing the Vulcan later after a short drive (if Welshbeef hasn't sold my fking cars)

[sidicks]

Sticks. said:

I'm sure it did say that. And I'm sure the salesman would've said not to worry about it, because there hadn't been any reason too.

How much contact did you have with the salesman after the initial sale?

Sticks. said:

If it was just about what was written down, what point the salesman? (the clue's in his title). My point is that everybody had faith in it at the time, salesman included. Hindsight is wonderful.

Indeed - a point a made previously in response to someone else!

Sticks. said:

... it's a sunny day and there's a chance of seeing the Vulcan later after a short drive (if Welshbeef hasn't sold my fking cars)

Me too - will be heading off shortly!