The Endowment Diary

The Endowment Diary


The Endowment Mis-selling Debacle - one of the UK's worst financial scandals

Saturday, January 31, 2004

A few statistics, provided by the FSA to the Treasury Select Committee investigating the Endowment Mortgage mis-selling scandal of the eighties, to depress you:

  • There are estimated to be 5.3 million people holding endowment polices, who face a shortfall

  • The average shortfall is expected to be £5500

  • The total value of the shortfall is expected to be £30BN

I fear that these are very optimistic estimates, to say the least; and suspect that the average shortfall will be in the region of between £10K-£20K.

On the this basis, we are likely to see a total shortfall of around £100BN.

Friday, January 30, 2004

I understand from reports that Legal & General will review the sale of with-profits saving products.

By all accounts Standard Life is also thinking along the same lines.

L&G CEO David Prosser told the Treasury Select Committee:

"...We have some doubts about whether there will be sufficient capital being created for the future to maintain these with-profits products.....We would certainly review whether to keep offering with-profits products..."

These products are mainly invested in equities.

Their reputation and usefulness have been diminshed expensive guarantees and falling bonus rates.

Sandy Crombie, CEO of Standard Life told the Committee:

"...The trend is against with-profits.."

The party is over!

Someone will now have to clear up the mess left behind by these underperforming products; which were used to provide the capital to repay mortgages taken out in the eighties.

Wednesday, January 28, 2004

The directors of some of Britain's largest life assurance companies were given quite a grilling yesterday by the Treasury Select Committee.

These life assurance companies, are those well respected institutions who sold us our underperforming endowment policies in the 1980's.

The Times printed a few stats relating to the pay rises of the top four bosses, and the performance of a 25 year endowment policy taken out by a male aged 29 contributing £50 per month.

Richard Harvey (Aviva) paid £1M 2002, pay rise since 1999 45%- endowment payout 2002 £88K, 1999 £110K (fall 25%)

David Prosser (L&G) paid £1.3M 2002, pay rise since 1999 50%- endowment payout 2002 £74K, 1999 £101K (fall 27%)

Sandy Crombie (Standard Life) paid £0.7M 2002, pay rise since 1999 70%- endowment payout 2002 £90K, 1999 £107K (fall 17%)

Jonathan Bloomer (Prudential) paid £1M 2002, pay rise since 1999 52%- endowment payout 2002 £78K, 1999 £106K (fall 26%)

Nice work guys!

Thanks to The Times for providing the figures.

Tuesday, January 27, 2004

I see that Jonathan Bloomer (CEO of Prudential) has been up in front of the Treasury Select Committee, which is investigating the endowment mortgage mis-selling scandal.

He told them the following, "I very much regret any mis-selling that we have done".

That's alright then!

Other heads of the companies that sold these endowment policies will be grilled by the Committee today.

The FSA estimates that around 3.5 million people are facing a shortfall on their endowment policies.

By anyone's reckoning, that is a lot of angry people.

Wednesday, January 21, 2004

I received a letter from the company that is handling my claims for endowment mis-selling, in respect of my endowment policy taken out in 1987.

They state that they beleive that I "have a good case for receiving endowment mortgage compensation".

If this is true, then it will be a watershed for people who are facing shortfalls on policies taken out pre April 1988.

The endowment companies have been hiding behind the legislation that only came into effect at that date; stating that pre April 1988, the rules for mis-selling do not apply.

The letter included a form for me to complete (I am an expert at these!), which enables me to provide them with more details about the policy.

Monday, January 19, 2004

First the good news; the FTSE is on the rise, and has hit an 18 month high.

Now the bad news; the companies that manage endowment schemes have reduced the proportion of their assets held in equities, favouring less risky (and less profitable) bonds and gilts instead.

This means that now that the bonus announcement season is upon us once again, don't get your hopes up; there will be a plethora of bonus cuts again this year.

Thursday, January 15, 2004

I received an email from the company handling my claim for the mis-selling of my second endowment mortgage.

It seems that there are areas that they can pursue in taking my claim forward.

The process is likely to take 3-6 months; not for the fainthearted!

Extract below:

"...We have assessed your case and have highlighted a number of possible areas
of complaint that we believe we can move forward on your behalf to your
endowment provider. If we have not heard to the contrary in the next 48
hours we will issue these complaints on your behalf.

To enable us to properly manage your expectations with regard to the
timescales involved in the complaints process, we are currently finding that
it takes 3-6 months for a decision to be made on a complaint. As soon as we
have some pertinent detail to report regarding your case, we will of course
contact you to advise of this. In any event, we will contact you 8 weeks
after the complaint has been issued to report progress to date..."