Nick

Hi

I've made an official complaint about my endowment policy & have been informed by phone that my complaint is likely to be upheld & it's going to a "department" which will consider making an offer of compensation.

Has anyone had any experience with this? How is the offer likely to be calculated?

TelBoy

More to the point, on what grounds did you believe you were mis-sold to?

OllyK

Is it just me, but how were endowments mis-sold? Were the FA's claiming they could not fall short of the sum required to pay off the borrowed sum at the end? Other than that, I'm not sure how an endowment could be mis-sold

vindaloo

Easy...ish.

Endowment was sold on the basis of providing £nnK in 25 years. Most won't achieve their aims. Whether you get a payment may depend on whether the endowment is still intended to cover an outstanding capital amount on your mortgage.

J.

OllyK

I was shown a higher, a lower and an anticipated figure based on previous experience, but it was made quite clear that it could all go **** up and you end up with less than the lower figure. I assume it is the abscence of such caveats that has been the cause of the problem? If people have been told it may not pay off the loan amount if it under performs then surely they can't claim?

Tiggs

you were not shown "expected" returns..you were shown projections based on FSA guess work.

when this happened 10 years ago no one mentioned that the projections may not be right and if that where the case you would need to put more in.

Its like buying a car and being told it will do 100 miles on £10 of petrol.......when petrol goes up you take the car back and whine because you cant do 100 miles any more.

most advisers wizzed through the small print to get a sale.....most clients saw the lower price of an endowment V repayment and didnt care about much else......when interest rates fell they spent the saving on big TV's while the resulting stockmarket/low interest rates fcuked over their endowment funds.

T

TelBoy

So Tiggs, are you saying it's worth ALL holders of endowment policies taken out before a certain time to claim regardless, and see what happens? I'd be happy to, but not if it resulted in a lot of bureaucracy for minimal return. Any advice?

OllyK

I hadn't realised people were that dense. I bought my endowment about 10 years or so back, was well aware it may not make enough and indeed my FA said it is a bit of a gamble, if all goes well you could be quids in...or then again you may not.

As it happened I cashed it in (probably not the best idea) went without for a while and then when I moved house recently went over to a repayment mortgage. Job's a good-un.

OllyK

I don't think that is what he is saying. I fall in to the suggested time period, but I was warned. I think you need to be able to show that nobody told you that the payout at the end could be less that lowest of the projected figures presented.

TelBoy

Hmm, so i've got to root through the policy to see if there's something written warning me that this could be the case? Like you, i'm pretty sure there's a sentence in there somewhere, even though nobody made much effort to highlight it at the time of course...

OllyK

There may be a sentence in writing in mine, but I was clearly told verbally when the guy explained it. He made a big point of it, in fact his very first question was "how do you feel about risk?" before he even started talking about types of mortgages. I can't fault the guy that talked me though the options. I even asked which I should go for and he wouldn't comit to an answer, said he had explained repayment and endowment but I had to make the final decision. I took my chances, I can't grumble, but all in all I have done Ok out of it, my mortgage was only £20K anyway.

TelBoy

But for a legal case, what the guy said is irrelevant, right? It's what's down in black and white that will determine the outcome, surely??

OllyK

I have no idea, I'm no legal eagle. I just know in my heart of hearts I can't claim that it wasn't all explained to me. I assume that some of this must be based on selling technique though, based on enough people claiming against a certain sales person and it all adds up that they didn't explain it clearly and pushed people in to buying an endowment. I dunno.

Tiggs

if its not written down it didnt happen.

TelBoy

So the answer's "yes" if there's no sentence specifically highlighting the risk of under-performance?

If this isn't your speciality, Tiggs, please feel free to say; i'd rather avoid a consensual SN guess...

Tiggs

you are alone!

if everyone felt like you there would be very little heard about endowments being miss-sold.

OllyK

It's good to be unique

Tiggs

your plan has a risk attached to it that it will not perform as you would hope.......that risk MUST be expalined to you and it must meet your own attitude to risk.

if it wasnt expalined to you and/or it was but doesnt match your attitude to risk then there is a problem with the sale.

any explanation and details of your attitude to risk should have been recorded in notes taken by the adviser at the meeting.

its not unheard of that people who may have been told cant recall and with no notes to back up the sale its deemed miss-sold.

Tiggs

if only it were that easy (for the industry)......."i want to complain no one told me the risk" ...."ok.....prove no one told you"....."errr....well they didnt"....."and where is the proof that something that didnt happen didnt happen"

They need to show it DID!

jasey

When I took out my first endowment (must have been 20 odd years ago now) I didn't think there was an alternative to endowments - You wouldn't know that repayment was still an option listening to the sales guys at the time !Wish I'd kept them going long enough to claim I'd been missold .

Nick

My question was whether anyone has any experience with endowment mis-selling & how my compensation offer will be calculated.

Does anyone actually know how this thing works?

Tiggs

at the time an endowment with projections at 7,9,12% would have made a repayment loan look VERY expensive....add to that that untill the end of the 90's people with endowments where collecting maturities FAR above the amount of original loan.................if every adviser had done what they should have there would still be an awful lot of endowments out there.

Tiggs

any decent adviser can explain it.......dont forget they will want a fee for it because thats better than nasty commision

Tentenths

First things first. The fact that your complaint is likely to be upheld doesn't *automatically* mean that you'll be paid compensation.

The company now needs to establish whether or not you have suffered a loss as a result of taking out the endowment. This is determined by comparing your overall position *now* with what it would be had you originally opted for a conventional repayment mortgage.

The calculations take into account the interest paid to the lender to date, total endowment premiums paid and the current surrender value of the endowment policy. This produces a total net cost figure.

Then a similar calculation is carried out on the basis that you orignally opted for a repayment loan. This takes into account capital and interest that would have been paid to date, together with the cost of suitable life cover. Again, this will give a net cost to date figure.

If it is then apparent that the repayment method would have cost less overall i.e. you are worse off as a result of the endowment, you will be awarded compensation. The aim is to restore you to the position you would been in had you opted for a repayment mortgage from outset - thus the compensation payment normally equates to the difference between the two figures.

The basis for the calculations/formulae/compensation is prescribed by the industry's regulator, the FSA.

Nick

Thanks very much Tentenths - exactly what I needed to know.

For the record, I've also found a useful website with some good info.

http://www.which.net/endowmentaction/index.html

Tentenths

Damn... knew there was something I'd forgotten!

Tiggs

yor're too nice....i'd want £200 per hr, coffee and biscuits to tell him that!

DrEvil

Funny - although you jest, this wouldn't surprise me either.

rallycol

iTrader: (4)

Ten Tenths is spot on,I have been compensated in a similar way,but I was not mis-sold the policy I was mis-informed as the policy went along,they gave me the wrong growth rate ,therefore not giving me a chance to make alternative arrangements for any shortfall , the wrong figures were given over 12 years of a 15 year policy,they appologised for this ,and duly paid up!

IanW

I used to work for one of the companies who sold LOTS of endowments and what they used to try and do was to put you into a position that you would have been had you taken out a repayment mortgage from the start.