Endowment Policies, I think the Government should act.....!

[jmg1]

People were told that on maturity the Policy would pay off their Mortgage, otherwise why would they take out the Policy?

I think that instead of the red letters and the farcical complaints procedure, the Government should force the Companies to make up the difference for the Policy holders.

I am interested to see who agrees/disagrees!

I started work for an insurance company back in 1982, part of whose business was endowments (amongst other types of policies). Back then, I had colleagues the same age as I am now (early 40s) who'd started work 20 years before, and being loyal to their employer, had taken out endowments. I knew a lot of people whose policies matured in the early to mid 80s, and not only were they paying off their mortgage (as predicted), they were also planning extensions, going on holidays of a lifetime and buying new cars, because those who had "with profits" policies were also getting a very generous and welcome bonus on top.

I bought my 1st flat in 1988 and thought nothing of getting an endowment mortgage. To me, on the face of it, it seemed straightforward, you get your mortgage paid off, AND life cover in the meantime, PLUS a nice extra lump sum. As a staff member, I simply filled out the forms, handed them to the relevant department, and that was that ...... there was no further discussion and/or warning from any of the "powers that be" or sales staff at that company, checking that I'd fully understood how endowments work, how end bonuses can't be guaranteed etc., and absolutely no warning (at that time) that the payoff might not even cover the mortgage.

Well, we all know what happened in the 90s ....

I guess I am lucky, I have subsequently moved a few times, and was able to switch to repayment. When I 1st did that it wasn't because of endowment concerns (more about what my partner wanted to do), and I decided to keep my policies going as a "nice" saving plan.

Ok ..... when they turn out to be crap, I'm not at risk of losing my home like many poor people, but still feel aggrieved to have been paying into policies for almost 20 years which have turned out to be very poor investments. Call me naiive now - especially as I was working for an insurance company (but I was a young 20 something doing admin) - but NO ONE ever explained the risks to me. If anything, the "virtues" of endowments were driven home far more heavily in the office, than if I had been a member of the public, who wasn't regularly being regaled with tales of her colleague's fantastic windfalls.

As far as I understand it, many people have successfully claimed compensation on the basis they were mis-sold endowments ..... but my impression is that the onus is on the individual to make and prove their claim, the companies themselves are not being at all pro-active in that respect - except for sending out their amber and red letters ! Furthermore, I think that you only stand a chance of success IF you still have an endowment mortgage ....

.... what about the people who were mis-sold them as a "good" life cover/savings plan ? I KNOW that many customers where I used to work DID take them out on that basis - and it is on that basis that I have continued to pay into mine (though admittedly, have worried about throwing money down the drain for the last few years).

If anyone better informed than me knows whether you can still make a claim even if you DON'T still have an endowment mortgage, I'd be very interested to know. I haven't had an endowment mortgage now for 6 years.

Sorry jmg1 ..... after that rant, I meant to say, yes, I totally agree .... the companies should ensure that at maturity you get what the policy is for ! Of course no-one would take out that kind of policy if they believed it wouldn't cover their mortgage - and, I believe the same should apply to those of us who have since switched to repayment mortgages and/or who were sold them as "reliable" savings plans with the additional value of life cover. After all, dead simple life cover (term assurance) is a whole lot cheaper than a blinking endowment, and the difference in premiums, it would seem, would have been better off in a million and one other investments.

I kick myself now for being so naiive, but in the 80s, there was no thought that the investment part of endowments might fail - I was definitely NOT told there was a risk the end payout might not even reach the basic sum assured. The impression given within the company I work for was most definitely: you get the sum assured, PLUS some sum of bonus, this figure can't be calculated now, but you WILL get something extra.

Now - you don't even get the bloody sum assured. I am convinced that 100s of 1000s effectively had the wool pulled over their eyes regarding endowments. The sales guys in my office were driving about in Porsches and the like, getting huge commissions on the back of selling these types of policies. With hindsight, I am almsot certain that some of the less experienced and younger sales people themselves didn't fully understand how endowments worked, and what exactly their success relied upon. Even if they had, the overriding atmosphere and selling approach was to sell a dream - pay off your house and/or get a significant lump sum, plus an added bonus.

I don't know if you could still claim now, but there are companies who state they will do the legwork for people who wish to claim. I have seen one adertise on TV recently, you could contact one and ask them.

People were given documents that showed different projected figures, usually 3 sets at 3 different percentages. By the 90s, nearly all these had clear language saying all figures were projected. Yet folks still applied for these things b/c someone told them what they wanted to hear. Well, hell's bells, of course people are going to believe that bit. READ THE FINE PRINT!

I've been caught out more times than not b/c of that. And who's fault is that? Mine, mine, mine!

Sorry, but why should a company pay out for something that may or may not happen b/c someone didn't read the fine print before they singed on the dotted line b/c all they saw were the set of figures they liked most? As most of these policies are nowhere near maturity. Who knows what the market's going to do in 10, 15 years.

I'd recommend visiting the which website. There's loads of information on there and a brilliant template for a letter to claim. I used this last year and it was really simple to do. We received compensation and then cashed in the policy. \link{http://www.which.net/endowmentaction/index.html\which}

jmg1- I totally agree that these companies should be forced to make up the difference.

Our complaint is with the FSA at the moment and has been for 18months. We took out 2 policies with Standard Life in 1996 and 1999, the 2nd one as a top up for a more expensive house. We were advised to take out the 2nd one even though the 1st one wasn't performing well. Despite this, our complaint has been turned down by the FSA. Not only that, they've turned it down using reasons that even the head of the FSA (bloke called John Tiner. You can Google the Tiner Principles to read them) said that endowment companies aren't allowed to use for turning down complaints. And here's the FSA themselves using the same reasons. So much for an independent organisation! We've also found out that the FSA works on commission as well, which makes them no better than the companies we're complaining about!

So as of last December, having had our complaint rejected by an adjudicator and had it reviewed by the FSAs Review Team, it's now gone to an Ombudsman for a Final Decision. After that, there's nothing else apart from going to court, and who wants to go to the expense of all that?

Catsmother- I'm amazed that you weren't told the risks! That's just left me

The only thing that keeps my blood pressure down is that when Standard Life de-mutualises later this year, we'll probably take the money and pay off as much of the mortgage as we can. There's no way we're going keep pouring good money after bad and keep paying commission to the advisor either.

Expatinscotland- you're right about reading the small print- if there had been any given in the documents we had when we took out our endowments. But the figures we were given said that our mortgage would be paid off. There was never any doubt that it wouldn't. What gets us, is that the reason why you go to financial advisors in the first place, is to get advice on all the alternatives that there are. When we took out the 2nd policy, it says on the notes that were taken at the time about our salaries etc, that alternatives were discussed. What was the alternative? Surprise, surprise! Another endowment policy but this time with Scottish Amicable. In the documents we've got it doesn't say anywhere that it wouldn't pay off the mortgage, the attitude of the advisor was that it would and would possibly give an additional amount at the end.

We only started getting "red warning letters" from Standard Life in 2000. We think that people in the industry knew that these were under-performing well before that, but they still kept selling the things.

Abbey National have been fined millions for their poor business/selling
AND
Abbey National have sent me compensation for crap endowment.
Hope evryone else follows

I actually feel that if companies are to be forced to pay out this will have an impact on the insurance companies to the point that any other investors will suffer. I work in the industry and whilst many people were missold and are quite rightly receiving compensation there are others who were advised correctly. The endowment route was actually cheaper for most people who took out their mortgages at the time. If you were offered the chance to a repayment or an endowment policy then, people always went for the endowment route because the costs were lower and the endowment policy included life cover. Unfortunately the with profits policy have produced lower returns but in all the cases I saw it was made clear to the customer that the mortgage would be repaid if the endowment returned 7% per annum or more on average. This was linked in with PIA guidelines at the time. Prior to that those guidelines were higher. Therefore who is at fault really if these guidelines were explained to the client. Does the PIA now the FSA take any responsibility? No. Therefore if it is shown that the client was missold, i.e. told for definite that the mortgage was going to pay off the mortgage surely the compensation should be the difference between the cost of the mortgage and the resultant policy less the cost of life cover. Let's not forget that if you have a unit-linked policy you will probably have had returns well in excess of this over the last three years and some red letters are now turning to amber or green. Remember all those pension misselling cases that were settled only to find out that the Company that they originally should have been with went bust and therefore those who opted out actually did do considerably better but the compensation was never reclaimed.

Therefore I would say compensation should be on a case by case decision taken into account all of the documentation received. The Government should not be involved as they will not really help. I heard of an ifa who used endowments for gay men as it was the only way to get them life cover and they knew this. He is now been forced to pay out anyway. I believe he is now bankrupt for trying to help. If you deserve compensation you should receive it but not every endowment holder deserves it. By the way I too have endowment policies.

Surely people were told there was no cast iron guarantee that endowments would pay out the full amount - based on performance and projected performance, our with-profits endowments were expected to pay out what we needed and more. We took them out about 8 yrs ago and have a couple more now from moving and topping them up. They are Standard Life ones and now on Amber Alert - significant risk of not paying out full amount.

We are lucky that it doesn't matter - we have paid a lot off our mortgage anyway and now have a new one which we are paying by capital repayment - we are keeping our endowments anyway so we should just have some nice lump sums coming our way in the future that we don't need for our mortgage anymore.

I wouldn't try to get compensation though as I always knew they were not a guaranteed way to pay off the mortgage. Are people really saying they thought they were guaranteed to pay out?

Tbh, I'm stunned that people wouldn't even question it at the time of being advised - but then I'm hugely thorough when it comes to finances and have to fully understand how everything works and if there are any risks involved. I'd be too scared of not being able to pay off my mortgage. I have to feel certain I'm fully covered.

We took out an endowment in 88 (possibly 87) - were given the whole schpiel about how it should pay off our mortgage with wads of cash to spare. I suppose because, up until then, that's what they had been doing. At no point where we warned that there was just as much chance that they would not pay off our mortgage - and we weren't financially clued up to expect anything else. I suppose because, up until that point, that just wasn't happening. Unfortunately, we took out the mortgage just before the cut off point for complaints about misselling - if we'd been a month or two later in buying our house we'd have been able to complain. To be honest, I think that in itself is a bit off - but there's nothing we can do about it.

GDG - I was 20 when I took out my mortgage. I was advised by a firm recommended by a relative, who was himself a stockbroker. I'm not surprised I didn't really question what I was being told - I had nothing else to go on and everything suggested that what they were telling me was what would happen.

Willow - sorry, I didn't mean to sound rude - it's just that I'm so thorough, my IFA was laughing the other week when sorting out this new mortgage that I was asking 1001 questions! He did say the majority of people just go with it but I'm just not naturally a risk taker and do like to be clear on financial things.

I know what you mean about the fact they'd always previously done well - my Dad did well out of them and he put them in a good light for me aswell but I do distinctly remember wanting to be clear about the risk so I know I was told they were not guaranteed.

GDG - hindsight is a wonderful thing.

8 yrs ago people were made very aware of the risks, back in the eighties they weren't.

I took out an endowment in 86 - with a partner - we took out a joint life policy and after we broke up 5 yrs later, I took the policy over but couldn't remove his name/ life from it.

These days they advise you to take out individual policies - that certainly wasn't the case in those days.

Also the endowment policies were cheaper - a hugely influntial factor for struggling first time buyers.

willow2 I think you're right. There was no evidence of the any downward trend at the time, since they were based on historic growth rates in a high interest rate economy, and noone would have wanted to believe it anyway. Insurance companies offered no guarantees although there may have been less scrupulous agents "interpreting" the figures, hence the misselling and compensation claims.

dh worked for a Life Insurance company back then and the staff mortgage scheme insisted upon it so a repayment mortgage was not an option for us. He isn't sure why you have missed the cut-off to claim misselling. You should have received a number of letters warning you of the projected shortfall and the deadline to claim from the Insurer over the last few years - have you contacted Insurance Ombudsman to confirm this ?

You can only claim from a certain point - sometime in 88 I believe and we bought just before then.

If you bought before then it is entirely up to the company that sold you the policy to decide whether or not they want to investigate if the policy was missold. Funnily enough, most of them don't want to.

I took mine out in the 80's and no small print mentioned risks.
I am careful financially and asked the seller if the policy would pay off the mortgage and i was assured that it would and that it would also most probably have additional funds. If I knew their was a risk of a shortfall I would have gone down the repayment route.

It certainly was a dfferent financial world in the eighties:

there wasn't the financial awareness and sophistication that there is today - no home pc, no internet, no online banking.

Ordinary people didin't own shares and it was not easy to buy and sell them - only the wealthy played the stockmarket via a Stockbroker. I remember the excitement and daring of buying my first privatisation shares - British Gas.

Mortgages were quite hard to get - no chance of a 100% mortgage and no companies fighting for your business with special deals. No flexible mortgages, no vast range of products, just a bog standard offer if you were lucky from your local Building Society or high st bank.

Also the stockmarket had been stable for 50 yrs - no-one anticipated Black Wednesday and the mortgage rate reaching 15%, otherwise thousands of people wouldn't have been trapped by negative equity.

I agree - in the 80's it was a different kettle of fish than today. There was little print - never mind small print! None of the warnings that your investment may go down and all the projections were at 10, 12 or even 15%. I worked for a financial institution at the time - was pretty aware but still took out an endowment.

Thankfully I managed to get out of mine - but only because they couldn't find the paperwork and therefore couldn't prove that I wasn't mis-sold.

When we were advised to take out our 2nd endowment in 1999, we filled in a "risk assessment" form about what our attitude to investments were. We ticked the boxes that said we were "cautious" and "wary of stock market change." According to the FSA, those people who ticked any boxes with the word "cautious" in, should never have been sold endowment policies. The very fact that we were "wary of stock market change" should have been enough.

As I've said to DH since, I always think that the Financial Advisor would have sold us an endowment policy whether we'd ticked the top box (adventurous and liked risk) or the bottom one (wanting to avoid all risks). I think commission has a lot to do with it. The same Advisor couldn't come up with a risk assessment form for our 1996 policy that he sold us because there isn't one. In 1996, endowments were still performing well, so these advisors didn't need to know what attitudes to risk were.

The projection rates used were those supplied by the regulating body at the time.

Illustrations were required at that point as was the famous 'investments can go up as well as down' disclaimers.

I was 18 when I took out a low-cost endowment(or Homebuyers policy as they were also known at the time) in the late 80's, not at all financially aware and I was quite clear that paying in £30 a month for 25 years wasn't necessarily going to provide the £19,500 I would need to pay my mortage. The 'sum assured' was in the region of £8.5K and the rest was to be made up by bonuses.

It is also worth bearing in mind that you need to show financial loss - which if you have only being paying interest and not captial and interest for the last 20 years then your financial loss may not be as high as you think it would be under FSA compensation schemes.

So to answer the OP I disagree - fine print reading required at all time. If however you didn't receive an illustration or poilcy douments that advised what your guaranteed benefits were then you have been mis-sold and have solid grounds for complaint.

I think its all very well saying "read the small print"

I was in my early 20s when I bought a flat on my own and had no experience of mortgages or endowments. I queried the "small print" verbally with my financial advisor and was told VERBALLY that the chances of it not paying out were "minimal". I am NOT a risk taker and would never have bought an endowment if the risks had not been played down by him.