The Endowment Diary

The Endowment Diary


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

Friday, October 29, 2004

The Devious Tricks of Life Assurance Companies and Banks

It seems that the life assurance companies and banks that sold us our useless and underperforming endowment policies, are doing their very best to avoid paying compensation.

That is at least the view of the Financial Ombudsman Service (FOS).

It seems that our "professional friends" in the life assurance companies and banks are ignoring guidelines, set down 3 years ago, as to how to handle endowment complaints.

The FOS will receive 70000 complaints this year, relating to endowment policies; in 2003 the FOS received 50000, and in 2002 they received 15000.

Needless to say, as I warned on this site over a year ago, the sheer volume of the complaints means that the FOS is having trouble processing them.

Delays of over a year are now standard, and indeed the FOS is having to "farm out" the processing to third parties.

One of the little "tricks" employed by the banks and life assurance companies, according to the FOS, is to make the complainant wait for 8 weeks before responding.

Apparently, the "professionals" believe that if they ignore the problem it will simply go away, like a bad dream.

My message to the banks and life assurance companies is simple:

-The problem won't go away

-The problem will get worse

-People are becoming angry

-Grow up, stop avoiding the issue and address the problem.

Thursday, October 28, 2004

Secret Commission Payments II

In view of the issues raised in the article "Secret Commission Payments", posted on the 19th of October, I have decided to write to my endowment company; asking them for details of all commission payments made on my two endowment policies.

I will update this site, with their response.

Tuesday, October 26, 2004

Judgement Day

A survey, recently undertaken by Abbey, has revealed the true extent of the mortgage crisis that will engulf the UK.

It seems that over 1 million homeowners with interest only mortgages, many of whom who have endowment polices, have not put together any plan for paying off their mortgages.

The housing market, and consequently the economy, will take a hard knock if these issues are not addressed.

Sunday, October 24, 2004

From Bad to Worse

"The insurance industry needs to take a long, hard look at itself ... there is simply no responsible argument for a system that rigs bids, stifles competition and cheats customers."

Not my words, but those of Eliot Spitzer, New York's attorney general; talking about the probity of the United States insurance industry.

He has launched a law suit, which will have ramifications for our own well loved insurance industry. He accuses the US insurance industry of corruption, and anti competitive practices.

The FSA is monitoring Spitzer's progress.

The crux of Spitzer's case rests on contingent commissions, that is commissions paid on top of normal commissions for selling insurance policies. The UK insurance industry is fretting, because it knows that there are contingent commissions paid in the UK as well.

It is a pity that the FSA needs to wait for the US to take the lead, in exposing corruption and dishonesty.

The fallout from this lawsuit adds to the worries surrounding the insurance industry; which were heightened this week, by the announcement from the Prudential that they needed £1BN to shore up their finances.

Friday, October 22, 2004

Standard Life Celebrates in Style

Standard Life celebrated breaking their £10BN target for mortgage sales, by giving their staff 1000 bottles of champagne (total costs £15K).

You will recall that Standard Life recently reneged on it promise to underwrite its endowment policies; it is expected that over 500K of its customers face endowment misery, as their policies fail to meet their targets.

I doubt that they will be cracking open bottles of champagne.

Nice bit of PR guys!

Wednesday, October 20, 2004

FOS Gets Tough

It seems that the Financial Ombudsman Service (FOS) is now thoroughly fed up with the tactics used by the life assurance companies, in trying to evade paying for their lousy underperforming endowment polices that 8 million UK households are saddled with.

The FOS has warned the life assurers that they will face large fines if they don't clean up their act.

The FOS is reportedly to be of the opinion that some endowment providers routinely rejected complaints, that they knew would be upheld if they were referred to the FOS.

I understand that at the end of March 2004, life assurance companies had handled 452,201 endowment complaints while the FOS had dealt with around 125,000.

Large fines are all very well and good, but the life assurance companies are wealthy enough to weather those; and indeed will probably just pass the costs on to the hapless policy holders.

What is needed is for the life assurance companies to underwrite these underperforming, poorly designed, polices.

Tuesday, October 19, 2004

Secret Commission Payments

I received this email today, from someone who has made a very interesting discovery about the commission payments being made "secretly" from his endowment policy.

It seems that, despite the fact the policy was sold to him back in the 80's, commissions of 2.5% are still being deducted annually from his policy; and paid to the IFA that sold him the policy.

Even more startling, is the fact that he could have cancelled these payments at anytime; had the life assurance company that runs his endowment policy bothered to tell him of their existence.

However, as his life assurance company puts it:

"..The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business

The 2.5% could well make a very significant difference to the maturity value of the policy.

In my view this is a very serious issue. The action of the life assurance company; in not telling him of these commission payments, and his right to cancel them, is scandalous to say the least.

I would be interested to hear from anyone else who has encountered this issue.

The text of the email is reproduced in full below, the name of the life assurance company has been withheld for the time being.

"..I have an endowment policy with ** (edited) that I acquired in March
1988. I recently had cause to telephone that organisation to ask why I
had not received any annual bonus statements for a couple of years. The
representative that fielded my call told me that statements had been
issued. I inquired as to where they had been sent and was given an address
that was a complete mystery to me, having never resided anywhere remotely
close to that location.

The representative explained that this must be the address of a firm who
were acting as my financial advisor. I said that I didn't have a financial
advisor and what on earth was he talking about? He explained to me that
normally a copy of the annual bonus statement is sent to the policy
holder's financial advisor at the same time as the original is sent to the
policy holder. He added that in my case, for some strange reason, my
address details had been overwritten with those of my "financial advisor"
and that consequently the original had been sent to them whilst I had
received nothing.

I repeated my statement that I did not have a financial advisor and asked
who exactly were this firm. After a little searching through my file the
representative explained that this was a firm that had taken over another
firm who were at the time also acting as my "advisor". That second firm's
name I did recall, just about. It was the company that had originally sold
me my endowment policy all those years ago.

I told the representative that at no time during the last 16 years had I
any contact with either of those firms, except during the time of the
policy sale back in March 1988. I then asked what possible reason could
there be for sending copies of my bonus statements to parties with whom I
had no ongoing relationship. I was told that whilst I may not have any
direct relationship, ** (edited) was paying out a commission each month
to the firm currently acting as my "advisor". I asked how much was the
commission and was told 2.5%. I was then told not to worry as this was not
coming out of my monthly premium. I then explained to the representative
that I was ultimately bearing the cost as the effect of the commission was
to reduce the available funds from which ** (edited) could declare a
bonus to policy holders. The representative agreed.

I said that I was aware that when an endowment policy is sold the firm
brokering the deal receives a lump sum commission payment. However, I said
that I was not aware that an ongoing commission is payable on each and
every premium until maturity. Nor was I aware that the entitlement to that
commission could be purchased by another firm. I asked whether the firms
were contractually entitled to this ongoing commission and was told that
they were not! I then asked what needed to happen for the commission not
to be paid. I was informed that all that needed to happen was for me to
tell ** (edited), in writing, that I wanted the payments to stop. I said
I would be writing immediately.

I then said to the representative that I was willing to wager that a
sizeable majority of policy holders were similarly unaware that such
ongoing commission charges were being paid. I also commented that the sum
total of these charges would amount to a significant sum ....a sum that
could surely have a material impact on the size of the bonus declared. I
put it to the representative that it would surely be in the best interests
of all policy holders for ** (edited) to immediately stop all ongoing
commission payments. The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.

I shall be writing to ** (edited) instructing that all ongoing commission
payments in respect of my policy cease immediately. I shall further be
stating that:

1. I was unaware that such payments were being made;

2. ** (edited) had not made me aware that I had the right to terminate
such payments;

3. The corollary of the fact that only I can terminate these payments is
that only I should be able to authorise the payments in the first place.
Needless to say, I did not give my consent to the payments;

4. Notwithstanding 3. above, if ongoing commission was not a contractual
entitlement then it should not have been paid out in the first place.

As a consequence of 1 to 4 above, I shall be demanding that the value of
the commission paid (plus compound growth thereon) be added to the
cumulative total of my reversionary bonuses.

I should be very interested to learn whether other policy holders are
similarly unaware of the existence of the ongoing commission payments and
that they have the right to terminate them..

Sunday, October 17, 2004

I wrote to the Treasury Select Committee a while ago, alerting them to the existence of this site.

I received a reply on Friday.

Here is an extract of the reply, received from the Senior Clerk to the Treasury Select Committee:

"....I have made your comments, together with the address of your endowment diary, available to all members of the Committee..."

Could be interesting.

Wednesday, October 13, 2004

Diversionary Tactics

It is reported that Legal and General (L&G) brought in a "memory expert" yesterday, to support their case against the £1M fine imposed on them by the Financial Services Authority (FSA).

The expert noted that customers' memories were likely to be distorted over the passage of time.

L&G are trying to undermine the customer survey, that was used by the FSA in their case against L&G for endowment mis-selling.

L&G allege that the survey of 152 customers was not large enough, and that the recollections of those questioned must be called into question.

Let us not get sidetracked by these courtroom games.

The real issue here is that people bought these useless polices, in the expectation that they would pay off the mortgage.

These policies are not going to pay off the mortgages. As a result of a combination of:


-Passing the entire risk of holding the policy onto the customer, whilst taking a fat commission

-Excessive commission payments

-Diabolical mismanagement of the funds in which the policies are invested

endowment policies are going to dramatically undershoot their targets.

In other words, they are not fit for purpose.

The FSA and the life assurance companies should stop messing around with these diversionary tactics. The issue is simply this, the policies were not fit for purpose; as such the life assurance industry, which has made some very large profits out of creating, selling and "managing" these useless products, must agree to underwrite them.

Tuesday, October 12, 2004

A "Shabby Habit"?

It seems that Abbey National are allegedly not playing fair with endowment complaints, relating to policies sold before 1988.

According to reports, the Abbey National are automatically rejecting out of hand any complaints made about policies sold pre 1988.

This despite the fact that the Financial Ombudsman Service (FOS) has warned them that they must investigate each case.

According to mortgage complaint handlers, such as Endowment Justice and CPH Financial Advisory Services, 100% of complaints are being rejected by a pro forma letter; which claims that Abbey do not have to establish attitudes to risk, or keep records of what was discussed pre 1988.

Over a year ago the FOS warned banks and building societies that mis-selling still can have occurred pre 1988. Our chums in the life assurance industry, despite attempts to obfuscate over this issue, still owe us the hapless owners of these useless policies a duty of care.

Our chums may now find themselves in hot water over this, as the FOS has reported their names to the FSA.

Abbey denies the allegations.

Will anyone who was sold a policy by the Abbey, pre 1988, and who has managed to gain compensation from them please drop me a note.

I am more than happy to back up Abbey's claim!

The bottom line here is, that if you receive a rejection letter from the company that sold you a worthless policy; don't accept it.

Fight back!

Monday, October 11, 2004

Expert Conned

It seems that even those at the very top of the finance industry, were conned into believing that endowment policies would work.

It is reported that Simon Chapman, a senior partner with PricewaterhouseCoopers (PWC) and an expert on financial services compliance, bought a Legal & General (L&G) endowment policy.

He was assured that the L&G policy was "a sure fire way" to pay off his mortgage, and produce a cash surplus.

Familiar words?

This revelation came out during the court battle between the Financial Services Authority (FSA) and L&G, last week.

Happily for Mr Chapman, after complaining about the policy being mis-sold, he received compensation of premiums plus interest.

Let us hope that we all receive such treatment from our life assurance companies!

Ironically he was then hired, jointly by the FSA and L&G, to investigate a sample of L&G endowment customers; as part of an FSA investigation into alleged mis-selling.

Saturday, October 09, 2004

One Million Barred

It seems that one million people may have already missed out on being able to claim compensation for their underperforming, useless, endowment policies.

The reason?

The time bar is beginning to bite.

If you haven't yet claimed, I suggest you pull your fingers out.

Friday, October 08, 2004

Lies, Damned Lies

Embattled endowment policy holders, that's you and me folks, suffered another kick in the "cahoonas" yesterday; as Standard Life reneged on its promise to cover endowment shortfalls.

The reason that they reneged on this promise, was in effect to make the company look more attractive to investors when it floats in 2006.

The promise, known as the "Standard Life Mortgage Endowment Promise", was made four years ago. Standard Life had pledged to provide financial support to customers with endowments that failed to meet their target value.

Seemingly that promise was bullshit.

The cover will now only apply to those polices maturing before the end of 2005.

This move is expected to adversely affect 600000 policy holders with underperforming endowments.

This is bad news for policy holders in Norwich Union, which had also given a similar undertaking to attract customers. It is likely that Norwich Union will feel free to renege on their promise, now that they have no pressure to keep it. They have stated that they intend to honour it.

Standard Life has also set May 2006 as the deadline for complaining about endowment shortfalls.

As if this was not bad enough, Standard Life also announced that they will be cutting top ups on other policies by 40%-60%. This will exacerbate the size of policyholders' shortfalls.

Maybe disgruntled policy holders should buy a stake in the company, when it floats, then sack the directors?

The problem being, that most policy holders are now fretting as to where they will find the money to cover the shortfall on their underperforming useless endowment policies.

Thursday, October 07, 2004

What is The Point of The FSA?

A few days ago, as noted on this site, I sent the FSA an email; asking for their reaction to the fact that my life assurance company suggested that I "top up" my underperforming, failing, endowment policy.

They replied today.

Their note contained links to parts of their site, with general information about endowments. However, they noted that they could not give opinions or rule interpretations; indeed they could offer no specific advice on the validity of any complaint that I may have.

May I ask, precisely what is the point of the FSA if it is not there to assist members of the public such as myself; when we are faced with a blatant attempt, by the life assurance companies, to con more money out of us?

Wednesday, October 06, 2004

More Mis-selling

My "friendly" life assurance company has written to me again, this time they have sent me a warning letter about my other endowment policy.

This policy, taken out in 1987, was meant to cover a mortgage of £35K.

The projected shortfall is, roll on the drums......£10600.

In other words 30% of my mortgage.

Put that together with the other shortfall of £14500 projected by my life assurance company (see earlier post), and I am going to have to find £25K when my two endowments expire in 2012.

Do I think that I have been ripped off?

I do.

To add insult to injury, the life assurance company then goes on to suggest that I could top up my underperforming policy.

I think that it is high time that these companies were brought "to book" over this £40BN scandal that is bordering on the criminal.

Tuesday, October 05, 2004

Think It's Bad in England?

Those of you who think that you are having a tough time in England, trying to claim redress for an underperforming endowment policy; should spare a thought for those living in Scotland.

It seems that the only channel Scottish endowment holders can take, when claiming compensation, is to use a solicitor to make a case against the original solicitor who mis-sold the policy.

In Scotland it is solicitors who handle property sales.

The Financial Ombudsman Service (FOS) cannot help, as solicitors advising on investments only came under the Financial Services Authority in December 2001.

The Law Society of Scotland can only order a solicitor to pay compensation up to a mere £1000, so they are not much use.

I hold the view that it is not so much the IFA that should be blamed, but the life assurance company that created this underperforming worthless product.

In my view tha the Sale of Goods Act should be invoked, after all these endowments were sold like TV's and cars, noting that the product is "not fit for purpose".

Monday, October 04, 2004

What is The Worst Criminal Act? Car Theft, or Mis-selling an Endowment Policy?

An interesting report is due to be published later this month by the Crime and Society Foundation, a new criminal justice think-tank.

The report claims that official crime statistics are not a reliable indicator of the true level of offences.

One section of the report refers to the damage done to society as a whole, by the mis-selling of endowment mortgages. Quote:

"A prolific car thief might blight the lives of tens of hundreds of people. The mis-selling of endowment policies has blighted the lives of many thousands...".

As many of us have long suspected, despite what the FSA and life assurance companies pretend, the mis-selling of endowment policies was bordering on the criminal.

Are we likely to see any arrests?

Sunday, October 03, 2004

I sent the FSA an email today about the suggestion, in yesterday's letter from my life assurance company, that I could "top up" my underperforming endowment policy.

I regard that suggestion as criminal.

I asked the FSA what they thought about it.

Saturday, October 02, 2004

Red Alert High Risk of Shortfall

That is the opening line of the letter that I received today, from the life assurance company that "manages" my two endowment policies.

This "red alert" is in respect of my second endowment policy taken out in 1991, and due to expire in 2012.

The policy was originally meant to cover a mortgage of £39700.

Today's "prediction" shows that it is likely to produce a shortfall of up to £14500, that is about 36% of the target amount.

How these people can call themselves professionals is beyond me.

The letter then helpfully suggests that I may need to take action, other than just suing the idiots who designed this worthless product.

To add insult to injury, one of their suggestions is that I may like to top up my endowment plan.

Who are they trying to kid?

Having been castigated by the press, the FSA and the Treasury Select Committee for mis-selling worthless products; our ever resourceful "professionals" now seek to make another quick buck, by trying to persuade people to put more money into these underperforming white elephants.

This strikes me as being another blatant example of mis-selling.

Friday, October 01, 2004

Endowment Crisis Spreads

It seems that it is not only the hapless home owners in the UK, who are suffering from being mis-sold non performing endowment polices.

The cancer of this financial scandal has spread to the Republic of Ireland.

It is reported by RTE that the Irish Financial Services Regulatory Authority, has strongly urged anyone who believes that they were mis-sold an endowment mortgage to complain to the companies who sold them these white elephants.

It seems that out of the 90000 polices sold in Ireland, most endowment mortgage holders have been told that their policies will have shortfalls.

Well, I wish them luck.

Doubtless they will encounter the same instrasigence, and evasion, that the UK holders have encountered as they try to claim redress.