Eva and I will be spending Hogmanay in Edinburgh, so postings will resume in 2003.

I wish all fellow endowment holders a happy and prosperous (well, it's the thought that counts!) 2003.

I received a reply from the Ombudsman today:

"..Dear Mr Frost,

I apologise for the delay in replying.

Unfortunately as your complaint is about an event which happened before any
financial regulation came into force, there is no other body that I could
refer you to. For instance, the Financial Services Compensation Scheme which
can consider complaints against firms that are unable to pay claism made
against them, was set up to investigate matters after 28 August 1988, when
its powers came into force.

I am sorry that I cannot be of anymore assistance to you...."

Whilst waiting for The Times and Consumers' Association to reply, I will consider what to do over the Christmas vac. If anyone has any suggestions please post them on the Forum or email me, thanks.

I received a response from the Consumers' Association today.

In essence they state that they are receiving many letters and emails that raise "difficult issues", and that they will try to be as helpful as they can. They ask me to be patient, as the letters may run into thousands. However, they will do their best and hope to be able to respond shortly.

As I have already noted, this problem is so large that the organisations that are trying to deal with it simply do not have the resources to cope.

Over the last few days I have emailed; The Times, The Consumers' Association and the Financial Ombudsman raising the same question.

Where do I go to make a complaint when the Ombudsman cannot help me because the endowment policy was sold to me pre April 1988?

I look forward to comparing responses.

One month after sending them the details, the Financial Ombudsman Service sent me a letter saying that "..your complaint does not appear to be one we would deal with because we can only consider complaints against Indpendent Financial Advisers where the advice was given after 29 April 1988..".

Not good enough, I will consider who next to raise this with. Should anyone have any suggestions please drop me a note.

Was this a scam or not?

Your views, please, on the following correspondence between myself and The Times; concerning a solicitor's scheme to help endowment holders that came to nothing:

My note 5 Dec (extract):

"...I received this note from a visitor to my website yesterday. As an experienced auditor and fraud investigator, my instincts tell me that something is not quite right (assuming the facts of the note are correct)....

Maybe you could do a little discrete digging?

Extract of note:

".... Two years ago while pondering which way to go with a claim about an endowment sold to me in 1990, I saw an article in The Times entitled "Lawyer helps endowment victims to sue". The legal firm, (edited out), appealed for mortgage holders to take a group action against insurers and advisers. I took the bait and paid a fee of £375. After prevaricating for two years they now say they are not going to proceed and have advised me and I presume the other 250-odd in the group that: you have the option to 'make a complaint yourself'' !!! I would be interested to know if there are others in the group visiting your site. I will now make a claim direct if I haven't missed the boat..."...."

The Times responsed 7 Dec saying that they had talked to the solicitor, and that the scheme was being suspended because they were unable to obtain legal expenses insurance. The Times was advised that people would get their money back.

My note to The Times 8 Dec (extract):

"...Many thanks for looking into this.

.... The note I received from my visitor says some 250 people sent money to this company.

So 250 at £375 per head gives £93750 which at say 5% pa over two years gives £9375 in interest; nice money for doing no work!

Maybe the solicitors should pay back the interest as well?..."

Yesterday I received a letter from Company A, dated 6 Dec, regarding the progress wrt my complaint. Extract:

"..I regret that we are are still not in a position to give a final response to your complaint because we are still in the process of collating the relevant information...If you have not yet completed and returned the documentation enclosed in our original response...please would you do so (editorial note: if they were processing it in a logical manner they would know that I had completed the documentation, after all this gives details of the mortgage etc).....I expect to be able to provide a final response ..by 31st January 2003...If you are dissatisfied with the delay..you may refer the matter to the Financial Ombudsman Service.."

As I noted in an earlier post, it appears that the administration systems cannot cope with the level of complaints.

Extract of letter sent to the FT today:

"..Sir,

It is encouraging to see the FSA take some action against one of the firms accused of mis-selling endowments. However, I disagree with Sir Howard Davies’s comments as per today’s FT; that it would be wrong to foster a regime that compensated people for investments not performing as people would like.

Endowments, when they were proactively marketed in the 1980’s and 1990’s, were treated by the mortgage and life assurance industry as products not investments; no different from a television or a car. They were, as the industry had us believe, designed to pay off the mortgage and provide a tax free surplus at the end of the term.

I am keeping an on line diary of my progress in obtaining redress against two companies who mis-sold me two policies; on my website http://www.kenfrost.com under the section The Endowment Diary. As is clear from the feedback that I have received; the consumer bought endowments as products, not investments, and took the companies at their word with regard the expected performance of these products.

Therefore, since they were marketed as products, they should be covered by consumer legislation. When you buy a car, designed to take you from A to B, and it irrecoverably breaks down (ie it was not of merchantable quality or “fit for purpose”); you take it back and obtain a replacement that works. The same principle of “fit for purpose” applies to endowments.

It is clear that they have proven to be “not fit for purpose”. Therefore, in my opinion, the basic principles of consumer legislation apply; and the relevant life assurance companies should underwrite the policies, and pay the shortfall between mortgage debt and endowment yield at the end of the term..."

I received the following from a visitor today, together with a large attachment. Unfortunately my email account couldn't handle the size, and seized up until I deleted the attachment. I have asked for it to be posted on The Forum instead. So keep a look out.

In the meantime, I would be interested to know if anyone else has lost money in similar circumstances?

Extract "...Hi Ken

I'm another victim of mis-selling. However, I have a novel twist because I seem to have been sold a pup twice. Two years ago while pondering which way to go with a claim about an endowment sold to me in 1990, I saw an article in The Times (copy attached) entitled "Lawyer helps endowment victims to sue". The legal firm, (edited out), appealed for mortgage holders to take a group action against insurers and advisers. I took the bait and paid a fee of £375. After prevaricating for two years they now say they are not going to proceed and have advised me and I presume the other 250-odd in the group that: you have the option to 'make a complaint yourself'' !!! I would be interested to know if there are others in the group visiting your site. I will now make a claim direct if I haven't missed the boat.

Your site is an excellent idea.

Good luck..."

I see that the FSA has fined Abbey Life £1M for mis-selling endowments between 1995 and 1999. Nice to see some action, albeit it a little slow, taking place.

As a consequence, Lloyds TSB has set up a £165M provision to cover compensation payments to an estimated 50000 customers; who were mis-sold their policies.

Now how about the FSA making a ruling on the other companies who mis-sold these products; which are clearly not “fit for purpose”.

I received a note from one of my visitors yesterday which, in my opinion, is a good example of the issues and problems facing the poor endowment holder. I have attached extracts of the emails between myself and my visitor.

1 Dec "Hi Ken
Just to let you know I heard from the Ombudsman last Friday saying they can do nothing for me. My policies were 1986 and 1987.
I also had a policy from 1990 which I accepted a settlement on a couple of years ago. I did not proceed with a complaint about the earlier policies because I did not realise I could take these to the Ombudsman then.
I worked my way through "the major building society's" (editorial change) complaint procedure and after receiving the final letter from them I contacted the Ombudsman in April.
They wrote to me in July saying I was out of time. I wrote back explaining I had followed the procedure and had my final letter telling me I could go to the Ombudsman.
Ombudsman wrote back saying they would send my letter to "the major building society" (editorial change). When I had heard nothing for 2 months I e-mailed them at the beginning of November. Apparently "the major building society" (editorial change) reply was lost in the post!
The Ombudsman suggests I was out of time and should have sent the complaint in 2 years ago. They also say they believe I was only worried about the falling value. They did not see my complaint as mis-selling. I have been told I can take them to court but I am retired for Gods sake! How do I pay for that!
I will just have to put it down to experience.
All the very best with your claim....."

my reply 1 Dec "....What a disgrace! I must admit I am expecting the Ombudsman to reject my claim against B as this was pre 1988. It is not clear, to me anyway, as to which body you are then meant to take your complaint.

I will cross that bridge when I come to it...."

2 Dec to me "...Hi Ken Its my understanding that if the ombudsman rejects a claim the only step then is to take the endowment company to court. I believe the small claims court has a limit of £5000 and I would suspect most people's endowments are greater than that. Most little people would be unable to take on the big firms, they wouldn't have the endowments in the first place if they had that sort of finance..... I shall continue to watch you site with interest. All the best...."

My reply..."I am not entirely certain about what options there are after the Ombudsman. I take your point about the costs (and let us not forget the stress) of going to court, it seems to be a catch 22 situation.

Re your specific case wrt endowments purchased prior to 1988, I think the Consumer Association website has the address of another body; which they imply (though not very clearly) may deal with these. I think, if memory serves, it is called the Financial Services Compensation Scheme.

As an alternative, you could try the technique of shaming the firms into doing something by writing to eg The Times, the Consumers' Association and BBC's Watchdog (the latter have a website through which you can submit your complaint, www.bbc.co.uk/watchdog I think). However, there are certainly better things to be doing with one's life!......

You may enjoy reading my articles on corporate governance and leadership, on "In Your Face", as a distraction from this. Maybe the Boards of our endowment companies should read them as well!..."

I would very much appreciate clarification from anyone out there in cyberspace as to whom one is meant to complain to about endowments sold pre 1988, if both the sales comapny and Ombudsman reject the claim. I know that The Consumers' Association are watching this site, please coud you guys clarify this?

One of my visitors sent me note pointing out, that whatever the Financial Services Act says; company B owes me a duty of care. He is quite right.

I will be interested to see if the Ombudsman takes up my case or drops it, as the policy was bought pre 1988.

I received an unsigned acknowledgement letter (dated 20 November) from the Financial Ombudsman service this morning. This has prompted me to ponder on the timescales and workload involved in processing claims.

On the assumption that The Times estimate is correct, there are between 5 million to 6 million underperforming endowment policies. Let us make the following assumptions (drawn from thin air, I admit):

 Take the lower figure, 5 million.

 10% of endowment holders bother to lodge a claim with the Ombudsman, that is a very conservative estimate; this would give rise to 500000 claims. Which no doubt, human nature being what it is, will be lodged at the last minute.

 The processing of the claim by the Ombudsman would include in my opinion (as a professional accountant), the following steps as a minimum:

- Opening the letter

- Opening a claims file

- Registering the file on a control log

- Reading the claim form and attached contents

- Entering pertinent details into a database

- Verifying key details to supporting evidence

- Contacting the life assurance company

- Contacting the financial adviser who sold the policy

- Reviewing the validity of the claim

- Making a decision as to whether the claim is justified

- Calculating the award

- Authorising the award

- Quality control/review the decision making process

- Informing the relevant parties

- Enforcing the decision etc…need I go on?

It is my very conservative estimate that in total the above steps would take 1 man day per claim, from start to finish, or 500000 man days in total.

There are 365 days in a year, of which 104 are weekends, 8 are bank holidays and 25 (or so) are holidays. That leaves approximately 228 working days a year.

So, 500000 divided by 228 gives us 2193 man years to process these claims.

I would suspect that by then we, and our loved ones, have all died; and the homes, on which the mortgages, are secured have crumbled to dust.

Of course these are just figures plucked from the air, maybe the Ombudsman is much faster at processing claims than I have suggested!

I sent the form and copies of other relevant documents off on Monday..we shall see what happens.

One visitor has made a post on The Forum which makes some very good points.

I have posted a public reply on The Forum which I would appreciate to hear your views on.

To me this whole sorry saga shines an uncomfortable "light of truth" (am I being a little too melodramatic?) on some of the key problems, facing individuals trying to make the best of their finances in "modern well regulated" Britain:

1 The inadequate compensation offered by those firms who mis-sold policies.

2 The fact that the FSA appears to be sitting idly by and taking no action to force Life Assurance firms to underwrite the endowments.

3 The lack of sensible options offered to an individual who is facing a shortfall.

4 The lousy rate of returns on savings being offered by banks; higher rate tax payers in many cases receiving negative returns.

5 Dare I mention pensions?

Is it any wonder that we as a nation are berated (by our "ever popular" government) as being poor at saving and hungry for credit...a financial system in which people have no faith is treated with contempt, as are the people who regulate it. See my related article on corporate governance (In Place of Strife) on my "In Your Face" site.

This is a very dangerous situation, I fear for the future. I know, this is a truism!

If the above contains spelling and other errors I apologise, I am writing with fire in my heart (how hackneyed!); straight into the diary rather than first putting it through Word.

I finished filling in the form from company A today, and will post it off to them tomorrow together with other documents; such as their promotional literature which states that "the product is deisigned to produce a surplus over and above the mortgage"!!!!

It occurs to me that the questions being asked on the form; eg attitude to risk, income and expenditure at the time of purchase, other investments held etc are exactly the questions that should have been asked at the time of purchase.

It does not take Rumpole of the Bailey to point out that the fact that they ask me these now, proves conclusively that they did not ask them in 1991 (otherwise they would have the answers in their records).

Therefore they mis-sold the policy..."case proven m'lud".

QED

Am I right or am I right?

No rest for the wicked!

Today I received a response from the Sales Complaints Administrator of company A, dated 13 November, relating to my complaint concerning my other endowment sold in 1991.

Brief extracts being:

“…I am sorry to learn of your dissatisfaction…

..You have raised a number of issues, which we will answer when replying with the results of our investigation…..

..I would be grateful if you could send copies of any relevant documentation in relation to your mortgage, including the application form and mortgage offer you may hold. This will enable us to deal with your case as efficiently and quickly as possible..

…Please complete the enclosed Endowment Questionnaire as fully as you possibly can. Without this information the process may be prolonged….

….This will be important if you complaint is successful to enable us to calculate the correct compensation if this is due to you…

..I am required by our regulators…to send you a letter within four weeks after receiving a complaint…In view of the late receipt in my department this letter serves to provide you with the four week update…”

The attached questionnaire they mention is similar to the Ombudsman’s one; except more complicated, eg details are required on my:

 Attitude to risk

 Existing plans and investments

 Mortgage details before, during and after the endowment.

I will dig through more dusty files and fill this in over the next few days.

I have just finished drafting my letter to the Financial Ombudsman Service, and will pop it in the post tonight on the way to the pub.

Let's see what happens now!

The edited text is as follows:

"...Dear Sir/Madam,

I wish to make a claim for financial redress in respect of an endowment policy sold to me, in August 1987, by company B the estate agents.

The basis of my claim is as follows:

 The Mortgage Services Partner of B advised me that the endowment would produce a surplus in excess of the mortgage which would be tax free.

 The Partner did not explain that there was a risk.

 There was no mention of the funds that my endowment would be invested in.

 The Partner did not enquire as to my attitude to risk.

 The Partner did not discuss the fees and charges on the policy.

 There was no fact find completed during the sales process.

 Other options for paying off the mortgage were not discussed.

Please be advised that I have already written to B along these lines. They reject the claim citing, amongst others, the fact that the Financial Services Act had not yet come into force at this stage. I reject their reasoning on a number of grounds; including, but not limited to, the following:

 Whether the FSA has jurisdiction, or not, over policies purchased before April 1988 is irrelevant. I was told that there would be a tax free surplus over and above the mortgage sum borrowed. There is now a projected shortfall, as advised by Company A, of £10500 assuming a 4% growth rate.

I draw your attention to the case summarised in The Times (26 October); whereby David Barker cited a 1965 Court of Appeal judgement by Lord Denning which ruled that a verbal statement which induced someone to take out a contract could be considered to be a warranty. Mr Barker was successful in obtaining compensation from the Halifax for the shortfall in his policy.

 The fact that the Financial Services Act came into force eight months after B sold me the endowment does not alter the key question as to whether best practice, from both an ethical and industry-wide perspective, was followed when the policy was sold.

 A well regulated ethical company would have been aware of the forthcoming legislation, and would have ensured best practice procedures were in place prior to its implementation; to ensure that the key issues raised by the legislation were addressed.

 As to whether the under-performance of the endowment policy could have been foreseen, or not, is irrelevant. The issue is whether the policy was mis-sold, or not, it is my contention that it was mis-sold.

I have completed the Endowment Mortgage Questionnaire, which I have enclosed together with the following:

 My letter to B raising the complaint (dated 11 October 2002).

 B's acknowledgement of receipt (dated 21 October 2002).

 The rejection from B´s Compliance and Quality Control Director (dated 28 October 2002).

 My response to their rejection (dated 4 November 2002).

 B's acknowledgement of this (dated 7 November 2002).

Please feel free to contact me if you require further information.

Thank you in advance for your time and assistance in this matter.

Yours faithfully,


K. Frost..."

As a further thought to my earlier post of today, I quote from the letter I received from company B (dated 28 October):

"..The Regulator has imposed a responsibility on companies that they keep their documentation for a minimum of six years before it is securely destroyed. You will appreciate therefore that after some fifteen years we will no longer have a file relating to this matter..."

OK then why does the FSA, in requesting details of my income and expenditure 15 years ago, obviously expect me (an ordinary citizen) to have kept the records going back 15 years?

Double standards?...what do you fellow endowment holders think?

After much hunting I found my records and have completed the form. I will draft the covering letter tomorrow.

Many thanks to "Dodo" who is enjoying the site and feels that it has inspired him to raise 3 complaints to the companies that sold him his policies, good luck!

I printed off the endowment mortgage questionnaire, used by the Financial Ombudsman Service, last night; in relation to my claim against company B.

This morning I started to fill it in. Most questions are, in my opinion, relatively straightforward; so long as you have your paperwork eg endowment number, company who sold it to you etc.

However, two questions require some detailed research through some very dusty files:

1 What was my income when I purchased the endowment? (for me this was 1987)

2 What was my expenditure in the same year (excluding mortgage)?

Fortunately I do have these details; being a squirrel I tend to hoard things.

I wonder though how many non squirrels (ie normal humans) out there in cyberspace have such records going back 10-20 years?

Straw poll please ladies and gents...have you got these details?

I have received a number of emails from visitors with similar problems. One I highlight below (I have taken out personal details so as not to predjudice the case):

"...my endowment is projected to shortfall max £XK. I complained
to the provider ( .... - same reasons as you,
promised it would pay off, plus a surplus etc) and have been offered a miserly
£YK once and for all ex gratia offer of redress. I contactd the FSA who
agreed with the basis of the offer ( to put me back where I would have been if
I'd taken out a repayment mortgage - no calculation of the cost of raising the
rest of the capital sum!)I replied citing the Halifax case and asked for £ZK
( based on 6% growth). They replied no way. I have 10 days to accept or
decline the offer. I need legal advice!....."

I am not a lawyer, but it seems to me setting a 10 day take it or leave it deadline smacks of bully boy tactics.

What do others think?

I see in today's Times Money section they have printed a letter about my website.

Rather amusingly, on the back page, they refer to it again describing me as "a retired accountant"; well at 40 I am too young and not yet wealthy enough to retire!

The Consumers' Association wrote to me yesterday saying that they can't help yet, but that they are monitoring the situation.

Additionally, I received an email today from a fellow endowment holder, seemingly in much the same situation as myself. I present edited extracts below:

".....I also sent off my endowment complain after constructing the www.endowmentaction.co.uk letter, and received a letter back.....saying "sorry you are unhappy with us".

I also have two policies ....... either side of the 1988 watershed. Both sold thru the same "former building society" and both with the same endowment company....I filled in an FSA form, that was pretty daft - eg "fifteen years ago, what was your disposable income per month excluding mortgage repayments" as if I can remember back that far.

I got a letter back today saying "still investigating".....Good luck..."

It occurs to me that maybe if readers want to give fuller details of their situations they could do so by starting a thread on my message board on The Forum.

Good luck to all, I will keep this up to date mith my actions and progress or lack of it.

Company B sent me a short response to my letter of the 4th today. Dated the 7th, the Compliance Director says:

"...Thank you for your letter dated 4 November and I note your comments.

While I empathise with the concerns being raised in this matter I regret at present it does not alter the stance being adopted by the Company although naturally we do respect your right to take this matter to any third party..."

I have decided to send a response to company B first, before making a submission to the relevant regulatory body. I have copied the body of the text below. The letter has been sent out today:

"...Thank you for your letter dated 28 October.

I have a number of observations regarding the points raised in your letter; including, but not limited to, the following:

 The fact that the Financial Services Act came into force eight months after B sold me the endowment does not alter the key question as to whether best practice, from both an ethical and industry-wide perspective, was followed when the policy was sold.

 A well regulated ethical company would have been aware of the forthcoming legislation, and would have ensured best practice procedures were in place prior to its implementation; to ensure that the key issues raised by the legislation were addressed.

 Whether the FSA has jurisdiction, or not, over policies purchased before April 1988 is irrelevant. I draw you attention to the case summarised in The Times (26 October); whereby David Barker cited a 1965 Court of Appeal judgement by Lord Denning which ruled that a verbal statement which induced someone to take out a contract could be considered to be a warranty. Mr Barker was successful in obtaining compensation from the Halifax for the shortfall in his policy.

 As to whether the under-performance of the endowment policy could have been foreseen, or not, is irrelevant. The issue is whether the policy was mis-sold, or not, as per my earlier letter it is my contention that it was mis-sold.

In view of the above, please be advised of the following:

 I intend to pursue my case for financial redress.

 I have copied this letter, and pertinent details of my situation, to The Times and the Consumers’ Association.

 I am drafting a submission to the relevant regulatory authority...."

30th October 2002

Today I receive a response from company “B” (dated 28th October) which is “pp’ed” on behalf of the Compliance and Quality Control Director. In summary the letter contains the following key points:

 It says that prior to April 1988, when the Financial Services Act came into force, there were no regulatory bodies controlling the advising or monitoring the selling of investment contracts.

 Economic conditions have changed since I was old my policy, and the changes in projected growth rates will have a big impact on the maturity values of policies.

 The 1980’s were a buoyant time, investment rates have fallen since then. This has affected “the investment performance of your policy” (no kidding!), and is an industry wide phenomena.

 The information that I have received from my assurance company show a “potential” shortfall (so this is a fuss over nothing?).

 In 1995 company “B” de-authorised their consultants, therefore they are neither authorised or registered to carry out a review.

 I have the right to take the matter further (very kind of them!), but as far as the author of the letter is aware the Personal Investment Authority (they kindly have attached an address) only have a remit to investigate alleged mis-selling of policies taken out after April 1988.

 Any documentation relating to the sale of my policy, being more than 6 years ago, has been destroyed.

So there I have it, “hard luck chum” there was no law in place at the time so we are “off the hook”.

My “off the cuff” opinion of the response from “B” can be summarised, but not limited, by the following points:

 Hiding behind the implementation date of the Financial Services Act is a weasel way of avoiding the issue.

 The policy was either sold properly or not, the timing of an Act does not change the fact of the situation.

 Implying that the policy may in fact come back to profit over the next 10 years makes a mockery of the warning letters being sent out by life assurance companies, and indeed of the projected rates advised by the FSA.

 By concentrating on the returns from investments over the last 10 years they try to avoid the key issue namely; whether the policy mis-sold or not.

The ball is now back in my court. I do not intend to be stonewalled in this manner. Over the next few days I will draft a letter to the relevant authority, as recommended by the endowment action website.

26th October 2002

An article in The Times notes that a gentleman who had threatened to take the Halifax (a major UK mortgage provider) to the small claims court received an undisclosed sum in compensation. This despite the fact that both the Halifax and Ombudsman initially rejected his claim.

It is clear that the glare of publicity and the sharing of peoples’ experiences will boost the chances for individuals pursuing claims against those organisations that they deem to have miss-sold the policies. I decide to set up a website to chart my progress, or lack of it.

23rd October 2002

I receive a letter, dated 21st October, from company “B”, confirming receipt of my letter and noting that it has been forwarded to their compliance department. The letter notes that I will be contacted in due course.

No words of thanks or sorrow though!

It will be interesting to compare the two companies approaches and decisions.

22nd October 2002

I receive a polite letter from “A”, dated 21st October, thanking me for my letter and expressing sorrow for my “dissatisfaction”. It notes that my complaint will be investigated by the sales Complaints Consultant, following a process outlined in an enclosed leaflet.

I suspect they have had one or two complaints!

11th October 2002

I visit the site again and complete the proforma letter builder section, which drafts two letters of complaint (relating to the two tranches of my endowment).

The key issue being that the complaint relates to the method of sale of the policy eg; other options for repayment of the mortgage were not discussed, the adviser told me that there would be a lump sum in addition at the end of the term etc.

The letters request that the companies reply to me within 14 days, and that they handle the complaint according to their usual complaint procedures.

I send the letters to companies A and B.

4th October 2002

I pay a brief visit to the endowment action website. It is well laid out and clearly identifies the steps involved in making a complaint. The key point being that it is not good enough to show a shortfall, you have to prove that you were mis-sold the policy.

2nd October 2002

By uncanny coincidence, I receive two separate warning letters (dated 30th September) from the life assurance company (company “A”), with whom I hold my endowment policies, concerning the potential shortfalls on these policies. Assuming a growth rate of 4%, when the polices mature in 2012 they will miss their targets by £11K and £15K respectively.

In other words, if the growth of the fund averages 4% for the remaining 10 years I will have to find an additional £26K to pay off my mortgage debt in 2012. This represents approximately 1/3rd of my total mortgage.

I take little comfort in the fact that company “A” believes the growth should be 6%; this will still leave me with a cumulative shortfall of £18K.

To say the least, I am more than a little “peeved” about the situation.

28th September 2002

I read an interesting article in The Times about how endowment mortgage holders can pursue their case for compensation. Apparently there may be as many as 5 million people in this situation.

The Times refers to the Consumers’ Association website www.endowmentaction.co.uk which lays out the procedures for making a complaint, and even provides a prof forma complaint letter builder.

Background

In the eighties and early nineties in the UK a popular method of funding the repayment of a mortgage involved the use of an endowment policy. Monthly contributions to the policy over a term, usually 25 years, would be invested by professional life assurance companies with the objective of providing a lump sum at the end of the term which was meant to pay off the mortgage and provide a tax free surplus.

The decline of the stock market over the past few years has caused returns on these policies to dwindle with an expectation that a large number of the policies will not provide a sufficient lump sum to pay off the mortgage.

I hold two endowment policies, both with a major life assurance company (for the time being I will call this company “A”). These were designed to pay off my mortgage debt in 2012.

I started the first in 1987 on the advice of the mortgage services arm of a major firm of UK estate agents (company “B”), the second was sold to me directly by company “A” in 1991.

On both occasions I was explicitly told that the amount would be enough to cover the mortgage debt, and that there would be a tax free cash surplus. I have now been advised that they will be unlikely to pay off the mortgage, and that the projected shortfalls on the policies (assuming a 4% growth rate) are £11K and £15K respectively .

I believe that I was mis-sold the policies, and as such am raising the issue with companies A and B in the expectation of receiving financial redress.