Endowment shortfall compensation
Discussion
Simpo Two said:
So you got compensation before the term ended (how did they know how much to give you?) AND the payout of £32K? AND £6K in shares as well?
I've no idea how they calculated the amount of compensation in 2004, I was just happy to take it, and reinvest it.As I said, I kept the policy going and two years later they demutualised giving their members free shares and the option of buying more at a preferential price, if I had just taken the compensation, ended my membership and gone away I would not have received the shares in 2006, which today are giving me a £6K profit.
£32K was the value of the policy at the last valuation, but there will almost certainly be a terminal bonus and they have also given me an estimate of the performance (lack of!) promise payment they will give too.
Elderly said:
I keep an endowment going just out of curiosity to see what happens in the end
and the life cover might still come in useful.
I was persuaded to take out a 25 year policy in July 1989 'promising' at least £60K.
Bizarrely it doesn't mature until December this year.
I will have paid in a little over £30K and the minimum pay-out will be about
£32K plus a terminal bonus and a small performance promise payment
.
Just after I took it out, I wrote to them saying that I didn't think that it
was a good idea as I saw the possibility of it all going pear shaped.
They replied that projections showed otherwise.
Fast forward to 2004 and I successfully did them for mis-selling
and received a cheque for about £20K ...... and to add insult to their slight injury I requested that I keep the endowment policy going, subsequently receiving what is at the moment, worth about £6K of their shares.
So ...... it is a crap investment but slightly better than having done it on a repayment basis.
I do feel sorry for those who are relying on the final pay-out to clear their mortgage and/or those that didn't manage to get a decent mis-selling sum.
Sorry to quote myself and the life cover might still come in useful.
I was persuaded to take out a 25 year policy in July 1989 'promising' at least £60K.
Bizarrely it doesn't mature until December this year.
I will have paid in a little over £30K and the minimum pay-out will be about
£32K plus a terminal bonus and a small performance promise payment
.Just after I took it out, I wrote to them saying that I didn't think that it
was a good idea as I saw the possibility of it all going pear shaped.
They replied that projections showed otherwise.
Fast forward to 2004 and I successfully did them for mis-selling
and received a cheque for about £20K ...... and to add insult to their slight injury I requested that I keep the endowment policy going, subsequently receiving what is at the moment, worth about £6K of their shares.
So ...... it is a crap investment but slightly better than having done it on a repayment basis.
I do feel sorry for those who are relying on the final pay-out to clear their mortgage and/or those that didn't manage to get a decent mis-selling sum.
but it seemed the simplest way to give an update.My policy matures next week and including a terminal bonus and a performance promise, it's going to pay out about £42K,
which is pretty poor compared to the £60K promised.
BUT - when I add the £20K I got for mis-selling ten years ago plus interest on that sum and the value of the free and preferential shares, plus a special dividend of £0.73 per share payable next year,
it's been much better for me than a repayment mortgage
(and we still have first death life cover if one of us dies before next week
).anonymous said:
[redacted]
my folks did similar...2 policies.
1 matured 10 years ago, but had paid off the mortgage and they had enough to buy a 911 outright with the profit apparently, the 2nd only came back 20k up...
Don't know how they did it, but as the property was only £21k to buy in 1978, I can quite believe it.
Jockman said:
Indeed. How does OP's friend know his projected payout when Terminal Bonuses aren't calculated until the end 
Surely he is just reading off his last statement ??
TBs used to double the payout but I don't believe they are as generous nowadays.
I hope your right when mine matures in 6 months!Surely he is just reading off his last statement ??
TBs used to double the payout but I don't believe they are as generous nowadays.
David
Elderly said:
Jockman said:
Surely TBs are still in double figures ?? I did see one as low as 17% a few years ago
I'll post S.L's present percentage when I see my paperwork next week but I'm guessing it's around 25%.
The old SL would have been generous, the demutualised? one perhaps less so.
Them thar Shareholders and their damn dividends !!
Interesting topic. I took out an endowment with Royal and Sun Alliance in 1997. (from memory) It was projected to cover £33k over 25 years. It is now with Phoenix. I have had several letters over the years warning about shortfall, so I have been paying more off the mortgage capital and we will be okay.
I doubt I will get back the money I have paid into the endowment over the years = let alone any of the growth projections originally shown.
Where I personally felt misled was regards to the fees involved which were not mentioned during the sales 'talk'. This basically crippled the 'investment' over the first year - probably the most important time.
Not sure if I have any recourse? - and I just felt duped over the years (a bit like buying a dodgy timeshare rather than a serious investment vehicle) So I have put it down to experience......
Mike
I doubt I will get back the money I have paid into the endowment over the years = let alone any of the growth projections originally shown.
Where I personally felt misled was regards to the fees involved which were not mentioned during the sales 'talk'. This basically crippled the 'investment' over the first year - probably the most important time.
Not sure if I have any recourse? - and I just felt duped over the years (a bit like buying a dodgy timeshare rather than a serious investment vehicle) So I have put it down to experience......
Mike
mike9009 said:
Interesting topic. I took out an endowment with Royal and Sun Alliance in 1997. (from memory) It was projected to cover £33k over 25 years. It is now with Phoenix. I have had several letters over the years warning about shortfall, so I have been paying more off the mortgage capital and we will be okay.
I doubt I will get back the money I have paid into the endowment over the years = let alone any of the growth projections originally shown.
Where I personally felt misled was regards to the fees involved which were not mentioned during the sales 'talk'. This basically crippled the 'investment' over the first year - probably the most important time.
Not sure if I have any recourse? - and I just felt duped over the years (a bit like buying a dodgy timeshare rather than a serious investment vehicle) So I have put it down to experience......
Mike
Mike, the fees are clearly stated in your original paperwork (or they should be).I doubt I will get back the money I have paid into the endowment over the years = let alone any of the growth projections originally shown.
Where I personally felt misled was regards to the fees involved which were not mentioned during the sales 'talk'. This basically crippled the 'investment' over the first year - probably the most important time.
Not sure if I have any recourse? - and I just felt duped over the years (a bit like buying a dodgy timeshare rather than a serious investment vehicle) So I have put it down to experience......
Mike
Bit late now but if at the time you were a single man with no dependents and no real need for life cover.....the mind boggles.
1997 was not a good year to start an endowment as you didn't have any of the 80s growth to fall back on
I can't believe the people defending these products or trying to make out that the buyers are somehow to blame.
Endowments were scandalously mis sold. The sellers lied through their teeth.
I remember daring, yes, that was how it felt, to ask about repayment and being assured that only people who were stupid with money or just hopelessly outdated would even consider such a thing. Not once either. We went to several high street banks and building societies and were absolutely assured that endowments were the key to future wealth. Phrases like "stupid", "outdated", "you'll be laughed at" were made regarding repayment, or indeed any other type of mortgage except endowments. Comparisons of mortgage products were impossible to compare, the examples were all totally different, so you had to ask. What did you get having asked for the figures on the house we were buying? A letter that didn't answer the questions and a brochure about, wait for it, endowments. When the big lump sum was mentioned it was absolutely assured as well. Any suggestion of risk was dismissed, that was just stuff they had to put in the small print, the people behind this were far cleverer than you.
Hiding behind "investments might go down you know" and implying that the hapless customer is a bit thick not to have realised this just isn't good enough.
If you bought a car with a three year warranty and it started rattling after six months would you be happy if the garage told you that cars might be unreliable as well as reliable, that drivers must be a bit thick not to realise this and if you don't like the rattle then you can always pay more, you see paying more is what you must do if you want the engine to last three years. Oh, and while this is happening the mechanics are being paid a fortune because they are so clever and we can't risk them not being properly rewarded can we? So you'd better be grateful that some of the money you paid for that car goes to pay them.
Endowments were scandalously mis sold. The sellers lied through their teeth.
I remember daring, yes, that was how it felt, to ask about repayment and being assured that only people who were stupid with money or just hopelessly outdated would even consider such a thing. Not once either. We went to several high street banks and building societies and were absolutely assured that endowments were the key to future wealth. Phrases like "stupid", "outdated", "you'll be laughed at" were made regarding repayment, or indeed any other type of mortgage except endowments. Comparisons of mortgage products were impossible to compare, the examples were all totally different, so you had to ask. What did you get having asked for the figures on the house we were buying? A letter that didn't answer the questions and a brochure about, wait for it, endowments. When the big lump sum was mentioned it was absolutely assured as well. Any suggestion of risk was dismissed, that was just stuff they had to put in the small print, the people behind this were far cleverer than you.
Hiding behind "investments might go down you know" and implying that the hapless customer is a bit thick not to have realised this just isn't good enough.
If you bought a car with a three year warranty and it started rattling after six months would you be happy if the garage told you that cars might be unreliable as well as reliable, that drivers must be a bit thick not to realise this and if you don't like the rattle then you can always pay more, you see paying more is what you must do if you want the engine to last three years. Oh, and while this is happening the mechanics are being paid a fortune because they are so clever and we can't risk them not being properly rewarded can we? So you'd better be grateful that some of the money you paid for that car goes to pay them.
I can still hear the salesman telling me back in 1988 that this was the way to pay off the mortgage after 25 years and have enough left over for a speedboat. His actual words.
I was still a kid and had no real idea apart from being told that I'd be daft not to buy a property. That sodding flat made no money in 10 years and having had my fingers burnt I refused to buy into property in the late 90s and early 2000s Doh! Doh! Doh!
It was supposed to cover a £50k mortgage. It matured last year and paid out £31k and I had paid in £23k, so a profit but pretty crap compared to inflation and nowhere near the target. This was through a period when interest rates where high and even before they dipped I was getting the shortfall letters.
I did try the Ombudsman a few years back but as the guy who sold the policy was freelance, there was nothing they could do apparently.
I was still a kid and had no real idea apart from being told that I'd be daft not to buy a property. That sodding flat made no money in 10 years and having had my fingers burnt I refused to buy into property in the late 90s and early 2000s Doh! Doh! Doh!
It was supposed to cover a £50k mortgage. It matured last year and paid out £31k and I had paid in £23k, so a profit but pretty crap compared to inflation and nowhere near the target. This was through a period when interest rates where high and even before they dipped I was getting the shortfall letters.
I did try the Ombudsman a few years back but as the guy who sold the policy was freelance, there was nothing they could do apparently.
Jockman said:
Mike, the fees are clearly stated in your original paperwork (or they should be).
I know the fees are on page two in small type. During the whole sales pitch ( over a couple of evenings) these fees were never mentioned. Unfortunately I did not check how the growth projections were calculated as I would have noticed a gaping hole from the first year.It was completely the wrong financial vehicle for me at the time - but being pre-internet (no chance to research fully) and me being a non-astute 23 year old, I bought it to cover my mortgage and speedboat!
Now, due to some fortunate mortgage decisions, I will pay off that part of the mortgage before the endowment matures. So not an issue - but I do feel it was mis-sold.
Mike
mike9009 said:
I know the fees are on page two in small type. During the whole sales pitch ( over a couple of evenings) these fees were never mentioned. Unfortunately I did not check how the growth projections were calculated as I would have noticed a gaping hole from the first year.
It was completely the wrong financial vehicle for me at the time - but being pre-internet (no chance to research fully) and me being a non-astute 23 year old, I bought it to cover my mortgage and speedboat!
Now, due to some fortunate mortgage decisions, I will pay off that part of the mortgage before the endowment matures. So not an issue - but I do feel it was mis-sold.
Mike
You've pretty much described me !!! The difference being I listened to a Which? article on Radio 4 a few years back and used their form to make a claim.It was completely the wrong financial vehicle for me at the time - but being pre-internet (no chance to research fully) and me being a non-astute 23 year old, I bought it to cover my mortgage and speedboat!
Now, due to some fortunate mortgage decisions, I will pay off that part of the mortgage before the endowment matures. So not an issue - but I do feel it was mis-sold.
Mike
I also stopped the other 3 endowments I had running as savings plans. They were less than 10 years old so were liable to capital gains but the small surplus was easily catered for by my CGT Allowance.
It is giving you a bit of life cover but at an expensive rate and I'll say a prayer that you receive a benign Terminal Bonus at the end
In the mid late 80s, I was living in Cyprus. 4 years of absolute hell. I digress. One evening, a rep knocked at my door and sold me 2 endowments. I was young and we didn't have access to the internet the , thinking about it, we didn't have access to anything. Just a fledgling Ayia Napa.
I was sold the dream; have a house paid off by the time I was 45. I bought into the endowments and over the next 10 years or so, chucked in £100 per month. I sold them 15 years or so back to fund a house purchase; all things considered, they didn't do too badly. I look back at the paperwork now though, and the key facts (as such as any existed) make me gape. Growth projections of a constant 12% pa, costs somewhere on page 7 etc etc.
We're a lot better informed today, thankfully, we have places like this. The point about costs made yesterday is absolutely vital. Investment growth is rarely if ever, linear, you will get peaks and troughs. If you have a huge slug of commission or fees taken out at outset, it's all the harder to recover that, pro rata, than imagining the amount being dripped out over time in keeping with a perfect growth graph.
People, in my opinion, don't mind paying for good advice as long as it is clearly explained, as long as the client doesn't feel like a cash cow, as long as the benefit of the advice is more than a sales pitch and the benefits professionally demonstrated and clearly articulated. There is nothing wrong in selling a financial service, but many of those bank salesmen (and I'm in sales too, let's not kid ourselves, I sell the benefit of my advice and expertise) had the same mentality as did those who sexually abused teenage kids in the 70s.. because, hey, it was normal, everyone is doing it so it can't be wrong.. can it?
I was sold the dream; have a house paid off by the time I was 45. I bought into the endowments and over the next 10 years or so, chucked in £100 per month. I sold them 15 years or so back to fund a house purchase; all things considered, they didn't do too badly. I look back at the paperwork now though, and the key facts (as such as any existed) make me gape. Growth projections of a constant 12% pa, costs somewhere on page 7 etc etc.
We're a lot better informed today, thankfully, we have places like this. The point about costs made yesterday is absolutely vital. Investment growth is rarely if ever, linear, you will get peaks and troughs. If you have a huge slug of commission or fees taken out at outset, it's all the harder to recover that, pro rata, than imagining the amount being dripped out over time in keeping with a perfect growth graph.
People, in my opinion, don't mind paying for good advice as long as it is clearly explained, as long as the client doesn't feel like a cash cow, as long as the benefit of the advice is more than a sales pitch and the benefits professionally demonstrated and clearly articulated. There is nothing wrong in selling a financial service, but many of those bank salesmen (and I'm in sales too, let's not kid ourselves, I sell the benefit of my advice and expertise) had the same mentality as did those who sexually abused teenage kids in the 70s.. because, hey, it was normal, everyone is doing it so it can't be wrong.. can it?
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