Endowment shortfall compensation
Discussion
So a guy at work was moaning that his endowment, which matures after 25 years in 2 years time, is going to be worth around £25k.
He has paid in around £28k so not a very good investment.
The mortgage that the endowment policy was supposed to cover was originally £65k and this was redeemed after about 5 years when he sold the house.
While this was being discussed over coffee his mate chips in saying that, if he makes a complaint, the bank that he has the policy with will pay him the difference - around £40k, plus he will get the £25k when the policy matures.
Is this correct?
No one at work knew.
He isn't good at doing claim forms but I said I'd help him for a few beers if it was going to be worth trying for a claim.
He has paid in around £28k so not a very good investment.
The mortgage that the endowment policy was supposed to cover was originally £65k and this was redeemed after about 5 years when he sold the house.
While this was being discussed over coffee his mate chips in saying that, if he makes a complaint, the bank that he has the policy with will pay him the difference - around £40k, plus he will get the £25k when the policy matures.
Is this correct?
No one at work knew.
He isn't good at doing claim forms but I said I'd help him for a few beers if it was going to be worth trying for a claim.
I think you'll find that for several years, his annual statement will have said somewhere in big red letters, something along the lines of "high risk of shortfall" along with several projections of the payout depending on fund growth. It will also have advised to make alternative provision for covering the shortfall.
If he has chosen to ignore these warnings then that is his fault, not the lenders.
If he has chosen to ignore these warnings then that is his fault, not the lenders.
DocJock said:
I think you'll find that for several years, his annual statement will have said somewhere in big red letters, something along the lines of "high risk of shortfall" along with several projections of the payout depending on fund growth. It will also have advised to make alternative provision for covering the shortfall.
If he has chosen to ignore these warnings then that is his fault, not the lenders.
If he has chosen to ignore these warnings then that is his fault, not the lenders.
Though word on the street in the City says that Endowment mortgages could be the next PPI - it's fairly believable that a lot of them were mis-sold. However the liability would be so huge that it would be unaffordable for the sector to stomach, so even if there was an investigation a la PPI, I don't think the regulators would have the appetite to force repayments.
Could be an interesting 4-way fight between the Banks, the FCA, the PRA and the politicians.
Most policy holders received a letter forewarning them of an expected shortfall in the prospective payout of their endowment plans. That letter allowed policy holders to register a complaint which usually resulted in some form of compensation. However, a time limit for such complaints applied and most ended in 2007 as far as I can tell.
I believe there are still some exceptions if your friend is lucky so please have a look at this website for the official guide.
http://www.financial-ombudsman.org.uk/publications...
Hth
JB
I believe there are still some exceptions if your friend is lucky so please have a look at this website for the official guide.
http://www.financial-ombudsman.org.uk/publications...
Hth
JB
Assuming that the policy was 'designed to' (coff) pay out at least £65K on maturity, it's lucky for him that he wasn't trying to pay off his mortgage with the puny £25K it was worth when it finally staggered wheezing over the line.
But it seemed like a good idea at the time. Love projections.
But it seemed like a good idea at the time. Love projections.
My 79k sum-assured matures next April - projected for £47k on this years letter. At least better than the OP's numbers!
Luckily it will also be topped up by Aviva because they have a "guarantee" which will top mine up by another 16k so hopefully it will also get a maturity bonus so may not be that light of the original amount.
David
Luckily it will also be topped up by Aviva because they have a "guarantee" which will top mine up by another 16k so hopefully it will also get a maturity bonus so may not be that light of the original amount.
David
GT03ROB said:
As ever not all were duff. I had one pay out 18months ago. 25yr plan. Designed to pay out 55k, paid out 55.5k.
Correct. The shortfall letters were arguably misleading too. If your endowment was projected to grow at 5% and has done so, you're ok. The letters then say "if it grows at 3% from now on you're doomed, sue now!!!" (well perhaps with a little poetic license...). Talk about stating the bleedin' obvious, and causing unfound panic.The most common compensation package is calculate what the policyholder would have paid off if they had a repayment mortgage up to the date of compensation, deduct the surrender value of the policy and compensate the difference. I have had numerous policyholders do this and find the compensation was next to nothing because they still had a considerable amount of the term to go.
pacoryan said:
The most common compensation package is calculate what the policyholder would have paid off if they had a repayment mortgage up to the date of compensation, deduct the surrender value of the policy and compensate the difference. I have had numerous policyholders do this and find the compensation was next to nothing because they still had a considerable amount of the term to go.
Well that's £40k in his case so may be worth having a go.I've tried this for a ppi policy I had a while back and the bank just said you left it too long mate. The financial ombudsman folded straight away.
I expect the warning letters (if he got some) offer the banks a pretty foolproof way out of paying up.
The reason they failed to perform was because interest rates were low. And because the rates were low, your mortgage was cheaper than you might have expected. So use the saving on your mortgage to top up the endowment, instead of wasting it on holidays and stuff and then bleating at the end.
Little sympathy I'm afraid.
Little sympathy I'm afraid.
rfisher said:
pacoryan said:
The most common compensation package is calculate what the policyholder would have paid off if they had a repayment mortgage up to the date of compensation, deduct the surrender value of the policy and compensate the difference. I have had numerous policyholders do this and find the compensation was next to nothing because they still had a considerable amount of the term to go.
Well that's £40k in his case so may be worth having a go.Regardless of this, he's almost certainly time barred as other have suggested (unless his policy has only recently started to have a projected shortfall)
TwigtheWonderkid said:
The reason they failed to perform was because interest rates were low. And because the rates were low, your mortgage was cheaper than you might have expected. So use the saving on your mortgage to top up the endowment, instead of wasting it on holidays and stuff and then bleating at the end.
Little sympathy I'm afraid.
I was mis-sold my first endowment in 1988, shortly before the cutoff date for compensation. The salesman and the documentation (NM Home Loans) promised a guaranteed sum, and probably 20% more. But 25 years later my five endowments paid about 55% of the sum they were predicted to pay. I had no dependents, no need for life insurance.Little sympathy I'm afraid.
Interest rates during that 25 year period averaged about 7%, and peaked at 15.4% - do you call that low?
I don't expect sympathy, but you're not exactly giving me a warm feeling about people in the financial sector
-Pete- said:
I was mis-sold my first endowment in 1988, shortly before the cutoff date for compensation.
I was compensated for mine, sold in 1986.Some of the figures in this thread seem high - our's was £25/mth against a £30K mortgage. So I only paid in £7500 and of course that included joint life cover.
It actually paid out £19K and I'd had £5K in compensation. I'd long since cleared the mortgage through overpaying it so the shortfall wasn't a problem.
-Pete- said:
I was mis-sold my first endowment in 1988, shortly before the cutoff date for compensation. The salesman and the documentation (NM Home Loans) promised a guaranteed sum, and probably 20% more.
Similar story here. I was advised that I could sue the adviser, but as he was/is my cousin and we get on well I did't... when I mentioned the matter to him gently he said that he really meant what he had written at the time and it wasn't his fault the markets had gone tits up. Which was true enough.I still have the letter. 'Handsome profit' it says...
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 or May of next year
depending on which piece of paper you look at.
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.
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 or May of next year
depending on which piece of paper you look at.
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.
Elderly said:
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 or May of next year
depending on which piece of paper you look at.
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.
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 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?Bizarrely it doesn't mature until December this year or May of next year
depending on which piece of paper you look at.
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
.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.
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