Endowment Misselling
Discussion
Ok have complained about misselling of my endowment policy, and the company concerned as agreed I may have have been missold and are now calculating the compensation payable.
My understanding is that they basically compare the surrender value of the policy with the amount you'd have paid off a repayment mortgage. Is this correct?
If it is how do you work out how much you'd have paid off a repayment mortgage?
Incidentially thanks to those who assisted with the original complaint.
My understanding is that they basically compare the surrender value of the policy with the amount you'd have paid off a repayment mortgage. Is this correct?
If it is how do you work out how much you'd have paid off a repayment mortgage?
Incidentially thanks to those who assisted with the original complaint.
Oh complicated stuff!
In the simplest of terms, your right, in England and Wales (and depending upon a few other factors) is that if it is deemed that someone was negligent in certain ways in their advice to you, you are entitled to be put back in the position you would have been in had you not taken that advice.
It becomes imperative that you assist by providing as much information as possible to help your own case when a firm (or the Ombudsman) is investigating your claim.
There are laid down rules about how compensation should be calculated in circumstances where it is established that you are at a financial loss and that that is through the advice given by a regulated firm. Especially if your case is with the FOS (and compensation is likely to be within the £100,000 FOS limit) you will have this calculated accurately and the decision will be binding, which should mean it is to your advantage and fair.
But! Don't be afraid of challenging either the basis of the decision, or the calculation made, if you have any doubts. (Firms will seek to have complainants accept "full and binding" offers to get them off the liabilities list!) Even seek some sort of check or further advice (admittedly this will be at your cost, assuming you are not going through a court of law and able to claim this back as part of a civil judgement) if you are in any doubt.
(BTW, a very strange situation exists in that if you are the other side of Hadrian's Wall, there's a strong possibility that you will feel seriously agrieved at the processes you have at your disposal compared to the Sassenachs to your south! Weird world that we live in!)
Edited to add: Assuming your complaint is one that falls within the various criteria to make it a regulated complaint, the compensation is explained by the FSA here
>> Edited by beano500 on Saturday 23 July 22:11
In the simplest of terms, your right, in England and Wales (and depending upon a few other factors) is that if it is deemed that someone was negligent in certain ways in their advice to you, you are entitled to be put back in the position you would have been in had you not taken that advice.
It becomes imperative that you assist by providing as much information as possible to help your own case when a firm (or the Ombudsman) is investigating your claim.
There are laid down rules about how compensation should be calculated in circumstances where it is established that you are at a financial loss and that that is through the advice given by a regulated firm. Especially if your case is with the FOS (and compensation is likely to be within the £100,000 FOS limit) you will have this calculated accurately and the decision will be binding, which should mean it is to your advantage and fair.
But! Don't be afraid of challenging either the basis of the decision, or the calculation made, if you have any doubts. (Firms will seek to have complainants accept "full and binding" offers to get them off the liabilities list!) Even seek some sort of check or further advice (admittedly this will be at your cost, assuming you are not going through a court of law and able to claim this back as part of a civil judgement) if you are in any doubt.
(BTW, a very strange situation exists in that if you are the other side of Hadrian's Wall, there's a strong possibility that you will feel seriously agrieved at the processes you have at your disposal compared to the Sassenachs to your south! Weird world that we live in!)
Edited to add: Assuming your complaint is one that falls within the various criteria to make it a regulated complaint, the compensation is explained by the FSA here
>> Edited by beano500 on Saturday 23 July 22:11
I get really annoyed with this compensation thing.
My mortgage has about 3 years to run and they keep telling me the endowment'should be alright'. Just. I don;t believe them and the bonus amounts seem to shrink dramatically every year as the value rises. Worse, the only reason it will get close is that the original endowment company, who have changed hands a number of times, issued a special bonus at some point in one of the deals.
A couple of years ago an estate agent I was talking to asked my what I knew about endowment shortfall. Turns out he had a 4 your old policay. Being in the trade he discovered (or so he told me) that one of his directors had a good letter to use for making a misselling claim. No good to me as the advise coming thorugh was that 'it would be OK'.
Anyway, he claimed and got some compensation. Then he asked "Where does the money come from?". "Me and others like me." I said. "If you get the compensation there is less in the pot for bonus payments."
"Never thought of it like that he said. Thanks for helping." They were crap at try ing to sell the house as well. Utterly useless in all respects.
I guess I am just unlucky. A pal whose mortgage and endowment finished a couple of years ago came out with house paid for and about £60k. So if you bought in the late 70's you should have done OK, early 80's - crap.
The policy I started on the previous house in the late 70's would have done OK then - had I not cashed it in to help fund the new house. (And of course pay the person arranging it a nice commission!)
The next 3 years could be interesting. The only certain thing is that the projected minimum additional value over the mortgage repayment value - some 56k iirc - will not appear.
My mortgage has about 3 years to run and they keep telling me the endowment'should be alright'. Just. I don;t believe them and the bonus amounts seem to shrink dramatically every year as the value rises. Worse, the only reason it will get close is that the original endowment company, who have changed hands a number of times, issued a special bonus at some point in one of the deals.
A couple of years ago an estate agent I was talking to asked my what I knew about endowment shortfall. Turns out he had a 4 your old policay. Being in the trade he discovered (or so he told me) that one of his directors had a good letter to use for making a misselling claim. No good to me as the advise coming thorugh was that 'it would be OK'.
Anyway, he claimed and got some compensation. Then he asked "Where does the money come from?". "Me and others like me." I said. "If you get the compensation there is less in the pot for bonus payments."
"Never thought of it like that he said. Thanks for helping." They were crap at try ing to sell the house as well. Utterly useless in all respects.
I guess I am just unlucky. A pal whose mortgage and endowment finished a couple of years ago came out with house paid for and about £60k. So if you bought in the late 70's you should have done OK, early 80's - crap.
The policy I started on the previous house in the late 70's would have done OK then - had I not cashed it in to help fund the new house. (And of course pay the person arranging it a nice commission!)
The next 3 years could be interesting. The only certain thing is that the projected minimum additional value over the mortgage repayment value - some 56k iirc - will not appear.
Mrs seb is a consultant in the area of financial mis-selling, and deals with endowment complaints often.
There is a software package used by FOS that will calculate the amount you would have paid off a hypothetical repayment mortgage, and compare that with the current surrender value of your policy. The same software package is also used by most firms. Compensation calculated in this manner is known as 'RU89', and FOS will not generally question any offer that uses this method.
It is likely that your interest only mortgage was cheaper than a repayment mortgage, but these notional savings should not be taken into account. If however, your interest only mortgage was more expensive than a repayment mortgage, then these extra costs should also form part of the compensation offered.
Ideally the calculation should follow what actually happened with your mortgage, ie lenders and rates, but in actuality it makes little difference if it doesn't.
If your mortgage stayed the same throughout, ie you did not convert to a repayment mortgage, pay off lump sums, increase the premiums to your endowment policy, partially convert to repayment, redeem your mortgage, etc, then the calculation should be straighforward as above. It becomes more complicated when any of the aforementioned took place, and these are areas where different firms may interpret things in a different manner. You may be able to argue the case if any of these applied to your mortgage/policy, depending on how the firm treats them.
As Beano has said,the basis of the compensation is to put you back into the position you would have been in, had you been given the correct advice at the time of the sale, although many complaints are upheld as it can't be proved one way or the other.
FOS and the FSA have a lot of information on their website, as has Oxford Actuaries and Consultants (www.oac.co.uk/) on the more complicated aspects of calculations.
With your offer letter, you may get a copy of the calcuation used. In any event, the letter will explain how the amount offered was arrived at. You should also be given a choice of surrendering or retaining your policy.
Mrs seb will be happy to have a look at the offer, or answer any other questions you may have. Feel free to email via profile.
Cheers
>> Edited by seb400 on Sunday 24th July 12:47
There is a software package used by FOS that will calculate the amount you would have paid off a hypothetical repayment mortgage, and compare that with the current surrender value of your policy. The same software package is also used by most firms. Compensation calculated in this manner is known as 'RU89', and FOS will not generally question any offer that uses this method.
It is likely that your interest only mortgage was cheaper than a repayment mortgage, but these notional savings should not be taken into account. If however, your interest only mortgage was more expensive than a repayment mortgage, then these extra costs should also form part of the compensation offered.
Ideally the calculation should follow what actually happened with your mortgage, ie lenders and rates, but in actuality it makes little difference if it doesn't.
If your mortgage stayed the same throughout, ie you did not convert to a repayment mortgage, pay off lump sums, increase the premiums to your endowment policy, partially convert to repayment, redeem your mortgage, etc, then the calculation should be straighforward as above. It becomes more complicated when any of the aforementioned took place, and these are areas where different firms may interpret things in a different manner. You may be able to argue the case if any of these applied to your mortgage/policy, depending on how the firm treats them.
As Beano has said,the basis of the compensation is to put you back into the position you would have been in, had you been given the correct advice at the time of the sale, although many complaints are upheld as it can't be proved one way or the other.
FOS and the FSA have a lot of information on their website, as has Oxford Actuaries and Consultants (www.oac.co.uk/) on the more complicated aspects of calculations.
With your offer letter, you may get a copy of the calcuation used. In any event, the letter will explain how the amount offered was arrived at. You should also be given a choice of surrendering or retaining your policy.
Mrs seb will be happy to have a look at the offer, or answer any other questions you may have. Feel free to email via profile.
Cheers
>> Edited by seb400 on Sunday 24th July 12:47
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