Endowment Red Letter
Discussion
Got one of these today, out of the blue. I can expect more as we have a few endowments collected over the years. We are (were) a couple of years from paying off the mortgage.
This particlar endowment has never performed spectacularly as it was taken out just before the last downturn. Over the last 12 months though it has slumped (surprise, surprise) as the markets freefall.
Ok, investments can go up as well as down. I've been philosophical in the past about endownment mis-selling, figuring that even if I wasn't offered much of a choice I did at least understand what an endowment was when I tools it out, even if I didn't believe the fantastical profit projections that came with the offer. Does that make the fact that a policy that was worth £25k plus 12 months ago is now worth £10k less - and probably less as interest rates are reigned back and that 4% projection looks more likely than the 6% one (if likely is the right word).
How times change. (Where are those who just last year were crowing about how London is the wealth generating heart of the economy, and how London would be better off without the rest of us?)
So. I'm totally reconsidering my position on the mis-selling angle. You see, I was under the illusion at the time that I was entering into a contract with a reputable and stable financial institution who would invest my fnds wisely for long term growth. It now turns out that in fact I was giving my hard earned to a punch of trouser filling wide boy cowboys who would unwisely, and to most sensible folks eyes fraudulently, give it to any tom dick or harry who had no hope of ever paying it back. And call it an "Investment Instrument".
I have a real hard time understanding why there haven't yet been mass arrests in the City for fraud, let alone why we are all being told to stump up even more cash to bail out these fraudsters. They must be pissing themselves laughing.
What do you think my chances are of getting compensation for being mis-sold on the grounds that they are financially incompetent and misrepresented themselves?
This particlar endowment has never performed spectacularly as it was taken out just before the last downturn. Over the last 12 months though it has slumped (surprise, surprise) as the markets freefall.
Ok, investments can go up as well as down. I've been philosophical in the past about endownment mis-selling, figuring that even if I wasn't offered much of a choice I did at least understand what an endowment was when I tools it out, even if I didn't believe the fantastical profit projections that came with the offer. Does that make the fact that a policy that was worth £25k plus 12 months ago is now worth £10k less - and probably less as interest rates are reigned back and that 4% projection looks more likely than the 6% one (if likely is the right word).
How times change. (Where are those who just last year were crowing about how London is the wealth generating heart of the economy, and how London would be better off without the rest of us?)
So. I'm totally reconsidering my position on the mis-selling angle. You see, I was under the illusion at the time that I was entering into a contract with a reputable and stable financial institution who would invest my fnds wisely for long term growth. It now turns out that in fact I was giving my hard earned to a punch of trouser filling wide boy cowboys who would unwisely, and to most sensible folks eyes fraudulently, give it to any tom dick or harry who had no hope of ever paying it back. And call it an "Investment Instrument".
I have a real hard time understanding why there haven't yet been mass arrests in the City for fraud, let alone why we are all being told to stump up even more cash to bail out these fraudsters. They must be pissing themselves laughing.
What do you think my chances are of getting compensation for being mis-sold on the grounds that they are financially incompetent and misrepresented themselves?
VictorMeldrew said:
What do you think my chances are of getting compensation for being mis-sold on the grounds that they are financially incompetent and misrepresented themselves?
You can't complain about financial incompetance i.e. poor performance. You can complain if the riske weren't properly explained to you, you are averse to risk or if a comparison wasn't made with other repayment methods (if it's linked to a mortgage).http://www.thisismoney.co.uk/saving-and-banking/ar...
"FSCS can also pay compensation for financial loss arising from negligent investment management and fraud, or if an authorised investment firm stops trading and cannot return its customers' investments or money."
I'd say it was not unreasonable to claim that the banks are guilty of negligent investment management.
"FSCS can also pay compensation for financial loss arising from negligent investment management and fraud, or if an authorised investment firm stops trading and cannot return its customers' investments or money."
I'd say it was not unreasonable to claim that the banks are guilty of negligent investment management.
Gemsbok1000 said:
VictorMeldrew said:
What do you think my chances are of getting compensation for being mis-sold on the grounds that they are financially incompetent and misrepresented themselves?
You can't complain about financial incompetance i.e. poor performance. You can complain if the riske weren't properly explained to you, you are averse to risk or if a comparison wasn't made with other repayment methods (if it's linked to a mortgage).
kwits (considerably increasing the risk) and you'd be better off sticking it on the dogs, I'd say he's got a point...Edited by Fatboy on Friday 21st November 23:23
This is another one of those sick bash a banker or financier threads isn't it? Just because you're a few bags down you think it's okay to come on here gobbing of about what a useless bunch of professionalised shop lifting bds the financial services companies are. You think just because you want to put a bit of money away for a rainy day you've got the right to bleat because they've pissed the lot up the wall on yankie mortgages and nasty CDS gambles.
Well you're right. You have every right to bleat. Bunch of robbing bds.
My Dad got the last laugh - he popped his clogs and they had to pay my Mum the full forecast! Swivel on that ya sharp suited out of work mortgage defaulters.
ds the financial services companies are. You think just because you want to put a bit of money away for a rainy day you've got the right to bleat because they've pissed the lot up the wall on yankie mortgages and nasty CDS gambles.Well you're right. You have every right to bleat. Bunch of robbing b
ds.My Dad got the last laugh - he popped his clogs and they had to pay my Mum the full forecast! Swivel on that ya sharp suited out of work mortgage defaulters.
Agree with above. It seems you have a performance complaint, which will not earn you any compensation for mis-selling. The Financial Ombudsman Service don't even consider such complaints generally and will not be interested in your issues with investment management.
You could raise a mis-selling complaint if you genuinely believe you have a case. Forget suggesting that any sort of guarantees were implied; Its untruthful and you'll not get anywhere. Also, you have suggested that you were aware of a risk element.
Two key remaining issues are whether an endowment mortgage was a suitable recommendation for you and whether you were reasonably aware of the repayment mortgage option. Consider what fund you're invested in also as, for example, its generally accepted that you would need to be accepting of a higher degree of risk (and being financially capable of coping with a potentially more significant shortfall) to invest in, say, a managed fund compared to with-profits.
I would not condone raising false issues in the hope of a payout, if only for moral reasons.
Finally, if you do complain, don't use a third party complaint handling firm; there really is no need.
You could raise a mis-selling complaint if you genuinely believe you have a case. Forget suggesting that any sort of guarantees were implied; Its untruthful and you'll not get anywhere. Also, you have suggested that you were aware of a risk element.
Two key remaining issues are whether an endowment mortgage was a suitable recommendation for you and whether you were reasonably aware of the repayment mortgage option. Consider what fund you're invested in also as, for example, its generally accepted that you would need to be accepting of a higher degree of risk (and being financially capable of coping with a potentially more significant shortfall) to invest in, say, a managed fund compared to with-profits.
I would not condone raising false issues in the hope of a payout, if only for moral reasons.
Finally, if you do complain, don't use a third party complaint handling firm; there really is no need.
Edited by Heathwood on Saturday 22 November 01:18
VictorMeldrew said:
Heathwood, thanks.
One other factor not mentioned, the IFA who sold the endowment was the vendor of the house I was buying. I was young a naive at the time I guess, but that seems a little compromised to an older, maybe wiser, me.
If the guy has followed the sales process correctly, and handled his paperwork correctly, then the fact that you bought a financial product from the guy selling your house to you is neither here nor there. Although I would question YOUR judgement on that.One other factor not mentioned, the IFA who sold the endowment was the vendor of the house I was buying. I was young a naive at the time I guess, but that seems a little compromised to an older, maybe wiser, me.
It also depends when the endowment was taken out. I think its 1988 is the date when rules changed.
You'll have to have a look at the FOS website, but their attitude is that poor performance alone does not constitute missellling.
What I don't understand from the OP's post is that his endowment has apparently lost £10,000. Endowments have a basic sum insured on the life to cover the mortgage and the intent is to pay premiums and add bonuses over the years towards paying the figure off at the end. I cannot understand how a policy that apparently is worth £25K becomes worth £10K less. Once bonuses are added they don't get taken away again. New bonuses will obviously be less as investments produce lower returns but some companies operate what they call smoothing where you don't get the full bonus from good years and they use the excess to increase returns on poor years - a bit of swings and roundabouts if you like. The projected value may have fallen but not the actual value.
It very much depends which company the policy is with as to how they work their bonuses some add a large lump as a final bonus right at the end others add steady bonuses with a lesser large lump at the end. If you only have a few years to go I should adopt a wait and see view on this - unless the company will give you a projection.
It very much depends which company the policy is with as to how they work their bonuses some add a large lump as a final bonus right at the end others add steady bonuses with a lesser large lump at the end. If you only have a few years to go I should adopt a wait and see view on this - unless the company will give you a projection.
elanfan said:
I cannot understand how a policy that apparently is worth £25K becomes worth £10K less. Once bonuses are added they don't get taken away again.
Poor investment performance can lead to a "market value reduction", so the worth of an endowment can fall.Most bonuses are not added until the policy comes close to maturity, so as yet those bonuses have not been added.
In part it will be down to the type of endowment the OP has.
Stock market has fallen about 40% this year.
40% of £25k = £10k
Seems you didn't understand that your endowment had risks to the downside as well as upside.
If you can prove that you weren't made aware that the value of your investment could go down as well as up, then you may have a case.
Otherwise, not I'm afraid.
40% of £25k = £10k
Seems you didn't understand that your endowment had risks to the downside as well as upside.
If you can prove that you weren't made aware that the value of your investment could go down as well as up, then you may have a case.
Otherwise, not I'm afraid.
I'm flabbergasted to read that people still have endowment mortgages. The market was quite obvious by mid last year, it was time to cut your losses and convert to repayment. We all took endowment mortgages because they were cheaper but carried a risk. Complaining about it or seeking compensation is just wrong, buy something cheap and you get something that is inferior, it's that simple. Anyone not heeding advice or failing to read the market last year has now found their fund reducing in value, surely people aren't surprised by this.
bobfather said:
I'm flabbergasted to read that people still have endowment mortgages. The market was quite obvious by mid last year, it was time to cut your losses and convert to repayment. We all took endowment mortgages because they were cheaper but carried a risk. Complaining about it or seeking compensation is just wrong, buy something cheap and you get something that is inferior, it's that simple. Anyone not heeding advice or failing to read the market last year has now found their fund reducing in value, surely people aren't surprised by this.
In the '80's NO-ONE selling mortgages explained endowments carried a risk. I took out two endowments in the '80's (cashed in a year ago). The nice man from the building society(it rhymes with Happy) told me very clearly that the mortgage would be paid off and i would have a nice lump sum at the end. Yes - naive to believe him. But in those far-off pre-internet days very few young (as I then was) people had any idea about money markets and financial risks etc. In those far-off days we respected the wise people who handled our money and never once thought to question their recomendations. No-one knew they were buying something cheap or inferior.It was way before products carried statutory warnings: "Past performance is no guarantee of future performance.
The value of investments and the income from them may go down as well as up and are not
guaranteed. You may not get back the amount invested".
So, yes - it was miselling,.
Edited by audidoody on Tuesday 25th November 09:31
Sorry, some folk seem to be taking this as a personal whinge by me, it wasn't meant that way I assure you. Well maybe a bit. 
I've "taken it on the chin" for years with this policy because I didn't feel it was right to complain when I knew the risks. I know those arguments, trust me, I have to justify that stance to the better half while all around people complained and were compensated. As for "why still have an endowment these days" - well, when you've had one maturing nicely before things start going pear shaped [last time around] and the best advice is not to cash your chips, its not that simple. Weather that storm, and then see things coming good again - these are a long term investment after all - and here we are, a year or so from maturity, with the projected value falling through the floor. How? Hell, I don't know, I have other endowments that don't seem quite so fragile, I don't know what the difference is with this one.
Anyway, its not about my specific circumstance, it's more an open question about the possibility that financial institutions might be held accountable in some way. They are obviously not being held accountable by those in power best placed to do so - in fact quite the opposite - so perhaps there is scope for some grass roots revolt.
Edited to add: and what Audidoody just said! It was 1986 FFS!
I've "taken it on the chin" for years with this policy because I didn't feel it was right to complain when I knew the risks. I know those arguments, trust me, I have to justify that stance to the better half while all around people complained and were compensated. As for "why still have an endowment these days" - well, when you've had one maturing nicely before things start going pear shaped [last time around] and the best advice is not to cash your chips, its not that simple. Weather that storm, and then see things coming good again - these are a long term investment after all - and here we are, a year or so from maturity, with the projected value falling through the floor. How? Hell, I don't know, I have other endowments that don't seem quite so fragile, I don't know what the difference is with this one.
Anyway, its not about my specific circumstance, it's more an open question about the possibility that financial institutions might be held accountable in some way. They are obviously not being held accountable by those in power best placed to do so - in fact quite the opposite - so perhaps there is scope for some grass roots revolt.
Edited to add: and what Audidoody just said! It was 1986 FFS!
Edited by VictorMeldrew on Tuesday 25th November 09:38
FFS anyone that took an endowment in the late 80's and kept it running and paying into it and didnt convert to a repayment mortgage at least 10 years ago is a complete idiot that needs shooting. Warings on endowments started hittin headlines in wht, 95? Earlier? Where have you been for the last decade? Had your head buried in the sand?
I'd be surprised if any judge looked an endowment misselling claim 10 year after the widly publisised events on endowment performance with any kind of sympathy for the mugs that continued paying in good money after bad.
I'd be surprised if any judge looked an endowment misselling claim 10 year after the widly publisised events on endowment performance with any kind of sympathy for the mugs that continued paying in good money after bad.
Wikipedia said:
The underlying premise with endowment policies being used to repay a mortgage, is that the rate of growth of the investment will exceed the rate of interest charged on the loan. Toward the end of the 1980s when endowment mortgage selling was at its peak, the anticipated growth rate for endowments policies was high (7-12% per annum). By the middle of the 1990s the change in the economy toward lower inflation made the assumptions of a few years ago look optimistic.
Regulation of investment advice and a growing awareness of the potential for regulatory action against the insurers lead to reduction in anticipated growth rates down to 7.5% and eventually as low as 4% per annum. By 2001 the sale of endowments to repay a mortgage was virtually seen as taboo.
Sorry, no sympathy. I understand what you are saying about fraudlant misuse of funds, but quite frankly you have a duty to look after your own investments. And if you are still running a bad investment 12-14 years after the advice was to get rid of them then its your problem, not someone elses.Regulation of investment advice and a growing awareness of the potential for regulatory action against the insurers lead to reduction in anticipated growth rates down to 7.5% and eventually as low as 4% per annum. By 2001 the sale of endowments to repay a mortgage was virtually seen as taboo.
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