£1100 paid in, £741 in fees, help!

[Largechris]

I have just received my annual statement for a mortgage endowment policy, in it's 24th year of 25. The fees deducted look quite extraordinary and I would never have agreed to this level of deductions -

For this past year, my premiums paid are £1094.52.

They have deducted £741.80 !

£275.46 Management charge
£45.72 Administration charge
£13.79 death benefit
£308.77 critical illness cover
£21.62 premium protection benefit
£20.07 disability benefit
£56.37 bid offer spread

(I've never been ill or out of work and wasn't expecting to be when I took out the policy)

I now realise why my investment has done so badly.

Due to a change of address I haven't received annual statements for some time until I chased them. I have asked for a summary of all the charges taken out over the term, and any evidence they informed me of any increases.

Yes I have been an idiot for not chasing harder, I did make a couple of queries in previous years and only got half answers or "can't trace the policy".

Just looking for some advice on next steps please. I want some of the premiums back at least.

[craig1912]

Largechris said:

I have just received my annual statement for a mortgage endowment policy, in it's 24th year of 25. The fees deducted look quite extraordinary and I would never have agreed to this level of deductions -

For this past year, my premiums paid are £1094.52.

They have deducted £741.80 !

£275.46 Management charge
£45.72 Administration charge
£13.79 death benefit
£308.77 critical illness cover
£21.62 premium protection benefit
£20.07 disability benefit
£56.37 bid offer spread

(I've never been ill or out of work and wasn't expecting to be when I took out the policy)

I now realise why my investment has done so badly.

Due to a change of address I haven't received annual statements for some time until I chased them. I have asked for a summary of all the charges taken out over the term, and any evidence they informed me of any increases.

Yes I have been an idiot for not chasing harder, I did make a couple of queries in previous years and only got half answers or "can't trace the policy".

Just looking for some advice on next steps please. I want some of the premiums back at least.

It’s more than just an endowment though. You have CI cover, disability and premium protection on top of the investment and life cover.
You don’t tell us what it is worth so no one can comment wether the balance of charges is reasonable or not.

[The Leaper]

Those fees would not have been deducted without your agreement, probably given at the time that you started the policy. If you claim that you were not told, then you could have a mis-selling claim against the seller. Was the seller the insurer or was it an IFA or other intermediary that you appointed? If you raise a formal complaint then you may need to go on and consider using the Financial Ombudsman Service (it's free), who deal with mis-selling matters among a host of others.

Also, a significant number of the items you show are for seemingly different insurance products, so it looks like you have a package of some kind. Odd that you were "sold" this but you say you did not sign up for them.

You say you moved and changed address but it looks like you failed to tell the insurer, and as a result you did not receive the annual statements that may have given you earlier warning of what you have now seen. This failure is a common fault and can cause many problems. It is not the insurer's fault that they could not get the statements annually to you. This point will have a bearing on their response should you make a complaint to the insurer, and what FOS may say too.

It will be interesting to see what other PHers post here!

R.

[Carbon Sasquatch]

The charges do look bonkers - but that may be down to how they have increased over time relative to the premium.

I'd start with the company themselves - do they have a complaints process for mis-selling ?

Saying that you didn't need the insurance 24 years later may be a bit of a stretch though - it's always easy after the fact....

[Aunty Pasty]

Do you still have the documentation for the endowment policy? Looks like you signed up to the endowment + a number of different insurance policies at the same time. I also had an endowment which finished last year. It fell short of it's initial projections but that's not important. At the time I signed up for Critical illness cover and was also offered others such as income protection insurance which i declined. Everything that I included was in that documentation.

So I suspect if you look back at the original docs it would all be in there.

Edited by Aunty Pasty on Wednesday 2nd March 14:03

[Largechris]

Cheers, to answer the queries -

No, I realise I have had the benefit of some level of insurance for 24 years, I'm not expecting a complete refund of all premiums.

Yes it was a policy originally sold to me by an IFA. There were always some premiums, I remember being told at the time I couldn't have the policy unless I also paid a separate premium for critical illness or unemployment or something, which I eventually complained about and I thought they stopped taking, although it looks like they are taking it directly out of my premiums now.

I knew I'd made a mistake signing up to an endowment at the same time everyone else in the country did. I made a miss selling complaint probably 12 years ago when that was still a thing, which they rejected, although at the time I don't think the fees were anything like what they are now.

To simplify it to known facts, if we look just at this year, since they have had my correct address, they have sent an end of year statement saying "paid in £1100, deducted £741". They haven't sent me anything for next year indicating what will be deducted for the next 12 months. At the very least this seems like inertia selling?

I doubt the IFA, if they are still alive, would have had anything to do with the rocketing charges?

I've asked for a full summary of the previous 23 years fees.

[Jon39]

Largechris said:

.... I remember being told at the time I couldn't have the policy unless I also paid a separate premium for critical illness or unemployment or something ...

Yes, that coercion is taught at IFA school. It is in the second module, the first one being, only refer to clients as punters when in the back office. ~

Endowment policies taken out in the late 1970s, early 1980s did pay out in excess of the required mortgage amount, but later on, much lower interest rates and Gordon Brown's removal of dividend tax credits, rather spoilt the final investment results. The sellers of those policies received a hefty proportion of the early monthly premiums. Everyone was happy with those early policies.

The punters went in simply to borrow money to buy a home, but then came out wondering why they now had a long term savings scheme. Answer - commission.

Everyone should be careful about being locked-in to very long term savings schemes, because tax rule changes and economic conditions are unforeseeable.

Insurers don't always win with property related policies. Mortgage indemnity policies were sold in the 1980s. They were to protect the mortgage lender (usually building societies in those days), when they lent more than their usual loan to value limits. Protection for lender but premium paid by borrower! If there was a repossession followed by a sale at less than the outstanding mortgage, the policy would trigger. All went well for a long time with no claims at all. Underwriters were talking about money for old rope. They had however overlooked one thing. Property values can go down, which they did in the 1990s.

The policies had 'small print', whereby the insurer could take action to recover their loss from the mortgagee (who you remember had originally paid the premium!). That did not go down at all well.

The whole escapade was a disaster for the insurers involved, costing them hundreds of millions. All because a few humans forgot to study property price history. They were booted out.

[Longy00000]

You keep referring to them as fees or charges but they aren't really, they are premiums for insurance that you have selected.
Critical illness is an expensive insurance but can also be very valuable when you have to claim. Like all insurance if you don't claim you think it's a rip off and a waste of money but if you do claim its the best thing since sliced bread.
It appears as though your endowment premium is only a portion of the £1000 paid but that doesn't mean the deduction of £700 are charges because they are not.
It's like me adding up car insurance, bike insurance and isa contribution all to 1 company and saying I've paid them £3000 but only £2000 has been invested why have they deducted £1000 in charges from my isa when in reality they deducted it to cover the insurance risk on my car and on my bike
If you made an endowment misselling case in years gone by and given you have had this for 24 years I don't think it will be easy to complain about it now. Surely when you looked at a miss selling case you would have reviewed it then or how else would have believed it was miss sold and if it was that bad why didn't you make it paid up then and move onto something more appropriate?
I just think you might struggle with this one but good luck with it.

[G7orge]

Largechris said:

I have just received my annual statement for a mortgage endowment policy, in it's 24th year of 25. The fees deducted look quite extraordinary and I would never have agreed to this level of deductions -

For this past year, my premiums paid are £1094.52.

They have deducted £741.80 !

£275.46 Management charge
£45.72 Administration charge
£13.79 death benefit
£308.77 critical illness cover
£21.62 premium protection benefit
£20.07 disability benefit
£56.37 bid offer spread

(I've never been ill or out of work and wasn't expecting to be when I took out the policy)

I now realise why my investment has done so badly.

Due to a change of address I haven't received annual statements for some time until I chased them. I have asked for a summary of all the charges taken out over the term, and any evidence they informed me of any increases.

Yes I have been an idiot for not chasing harder, I did make a couple of queries in previous years and only got half answers or "can't trace the policy".

Just looking for some advice on next steps please. I want some of the premiums back at least.

What was the expected est value of the endowment when you took it out?

[Largechris]

Longy00000 said:

You keep referring to them as fees or charges but they aren't really, they are premiums for insurance that you have selected.
Critical illness is an expensive insurance but can also be very valuable when you have to claim. Like all insurance if you don't claim you think it's a rip off and a waste of money but if you do claim its the best thing since sliced bread.
It appears as though your endowment premium is only a portion of the £1000 paid but that doesn't mean the deduction of £700 are charges because they are not.
It's like me adding up car insurance, bike insurance and isa contribution all to 1 company and saying I've paid them £3000 but only £2000 has been invested why have they deducted £1000 in charges from my isa when in reality they deducted it to cover the insurance risk on my car and on my bike
If you made an endowment misselling case in years gone by and given you have had this for 24 years I don't think it will be easy to complain about it now. Surely when you looked at a miss selling case you would have reviewed it then or how else would have believed it was miss sold and if it was that bad why didn't you make it paid up then and move onto something more appropriate?
I just think you might struggle with this one but good luck with it.

I do understand that, like I say I'm not expecting a refund of all premiums.

But if you look at the statement they have just sent me for the past year, this is money they have already deducted, and they are now deducting a new different amount for next year, WITHOUT TELLING ME HOW MUCH IT WILL BE.

If critical illness cover was, for example, £100 in 2016 (don't know until they show me), and it turns out to be £400 next year, surely they have to tell me in advance of taking my money?

Endowment was targeting £42,500, will be about £2500 short.

[craig1912]

I’m guessing the insurance premiums will have gone up over the years due to age. There was a thing as guaranteed rates but they tended to be more expensive in the early years so not chosen often. Your charges will have been a lot less in early years and given you are looking at around £40k in a years time I’m not sure you have any grounds to complain.
You may be able to cancel the “insurances” and just maintain life cover and the investment side which will help.

[The Leaper]

Largechris said:

If critical illness cover was, for example, £100 in 2016 (don't know until they show me), and it turns out to be £400 next year, surely they have to tell me in advance of taking my money?

Only if the policy did not make it clear at the outset that the CI premiums will rise each year, rather than be level annual amounts throughout the 25 years. And if it is clear that the premiums do increase each year it does not follow that the insurer is obliged to tell you each year by how much. All this should be mentioned in the policy document, a copy of which you do have and to which you have referred, of course?

[Largechris]

The Leaper said:

Largechris said:

If critical illness cover was, for example, £100 in 2016 (don't know until they show me), and it turns out to be £400 next year, surely they have to tell me in advance of taking my money?

Only if the policy did not make it clear at the outset that the CI premiums will rise each year, rather than be level annual amounts throughout the 25 years. And if it is clear that the premiums do increase each year it does not follow that the insurer is obliged to tell you each year by how much. All this should be mentioned in the policy document, a copy of which you do have and to which you have referred, of course?

I can find the policy document yes.

[Simpo Two]

Largechris said:

£13.79 death benefit
£308.77 critical illness cover
£21.62 premium protection benefit
£20.07 disability benefit

Blimey, it seems you ran into Ned Ryerson from Groundhog Day



But seriously, you've been paying this for 24 years; were these extra products not listed and costed before?

Presumably you agreed to them all at the outset - no doubt the IFA got commission/trail commission for each one kerching - BUT can the company produce a copy of the original contract with your signature on it?

[craig1912]

Simpo Two said:

BUT can the company produce a copy of the original contract with your signature on it?

Highly unlikely, nor are they required to after such a length of time. The OP has a copy of his contract and needs to refer to it first, to see what he signed up for. I’d say he hasn’t done too bad getting £40k, paying £1kpa for 24 years with the protection insurances.

[Sarnie]

The policy will have stated at the outset that the premiums were index linked and would rise annually, in line with RPI usually....they would likely have been sending annual statements each year but the OP has stated he didn't update them for several years as to his new address........

[snabzter]

The critical illness/life insurance/disability benefit charges will be age related, so they are likely to increase as you get older, but also dependant on the sum at risk. If your sum assured is £42.5k then the sum at risk is the difference between the sum assured and the underlying investment value (i.e. the unit linked or with profits endowment savings element). The bigger the difference the bigger the charges.

The charges will change over the year depending how the underlying endowment savings element performs so they can't tell you in advance what the life insurance charges will be. They could be estimated but if markets significantly fall the charges could be higher than estimated.

[Simpo Two]

craig1912 said:

Simpo Two said:

BUT can the company produce a copy of the original contract with your signature on it?

Highly unlikely, nor are they required to after such a length of time. The OP has a copy of his contract and needs to refer to it first, to see what he signed up for. I’d say he hasn’t done too bad getting £40k, paying £1kpa for 24 years with the protection insurances.

So it's up to the customer to keep the contract, not the company that issued it and is making money from it?

How do we know that the IFA wasn't dishonest and ticked all the boxes himself or made up a signature?

I am surprised that the company can seemingly burn the contract and keep charging effectively what it likes. This stuff is regulated isn't it?

[craig1912]

Simpo Two said:

So it's up to the customer to keep the contract, not the company that issued it and is making money from it?

How do we know that the IFA wasn't dishonest and ticked all the boxes himself or made up a signature?

I am surprised that the company can seemingly burn the contract and keep charging effectively what it likes. This stuff is regulated isn't it?

It’s likely that a policy document is available and it will say how the various elements are charged. Unlikely it can charge what it likes and whilst there was some regulation then, the FSA wasn’t founded until 1997.
We don’t know the IFA wasn’t dishonest, but good luck trying to prove it 24 years later. Unlikely the IFA exists but, the type of contract the OP is describing was not unusual, it’s just an unit linked endowment which not surprisingly are no longer sold, as IFAs can’t earn commission and the charges are very high.

[Jon39]

Simpo Two said:

I am surprised that the company can seemingly burn the contract and keep charging effectively what it likes. This stuff is regulated isn't it?

OP, hope you don't mind.

Not exactly the same circumstances, but it did also involve disposal of paper records, this time by banks.
I presume that all banks must have done the same, transferred their customer signature records from paper to computer.

The first thing that I knew about it, was a bounced cheque 'signature not recognised'.
Being rather suspicious about this, I decided to try cashing a cheque at the bank counter at the branch where the accoun was held. There was a kerfuffle while the cashier was looking at her computer screen. I kept quiet. Eventually the cashier revealed the evidence that I needed - some accounts have not had their signature records transferred to the new system properly.
To shorten a longer story, the bank eventually gave me £1,800 compensation.

Burning the records can bring good then.

It subsequently happened a second time with a different bank (not involving cheque bouncing), but I knew the score by then and they were so apologetic and charming, that I could not even accept their offer of a gift.

Arguing with customers when in the wrong, is not the cheapest way to resolve a mistake. Better to admit the error immediately.