The Endowment Diary

The Endowment Diary


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

Wednesday, December 14, 2005

The Pain of Mis-selling

The Pain of Mis-selling

It seems that it is not just the hapless owners of underperforming and useless endowment polices that are suffering, sometimes a little of the pain and misery caused by these useless products is spread around.

Mis-selling endowment policies has cost Lloyds TSB has £150M this year, that is in addition to the £360M already paid out in recent years for compensation claims over a variety of financial products.

Lloyds TSB is still reviewing the total cost of compensating its customers, but admitted that this could lead to an increased provision in the accounts.

In a trading update before its 2005 figures, Lloyds TSB revealed that it would also need to set aside another £150M to cover the cost on insurance policies of people living longer.

Lloyds TSB is not the only bank facing claims for mis-selling of endowment policies. HBOS has had to put aside £260M over the last two years.

Lloyds TSB warned that customers were continuing to have difficulty repaying their debts.

How can people be expected to repay their mortgage, if the policy that they bought to repay the mortgage doesn't work?

Analysts at Dresdner Kleinwort Wasserstein have described Lloyds as "strategically challenged". There is now speculation that it may be a takeover target.

What goes around, comes around!

Thursday, December 08, 2005

Backing For Scottish Endowment Compensation

Backing For Scottish Endowment Compensation

Opposition parties in Scotland have publicly committed their support to the campaign to secure compensation for thousands of Scottish homeowners, who were mis-sold endowment mortgages by their solicitor.

Charles Kennedy, Liberal Democrat leader, and Alex Salmond, SNP leader, urged the government to close a legal loophole which leaves many Scots facing huge shortfalls.

People who bought a policy through a lawyer in Scotland, before December 2001, do not qualify for a settlement under the Financial Services and Markets Act.

Mr Kennedy said:

"It is an absurd situation if people in Scotland don't have the same protection against endowment mis-selling as homeowners in England and Wales. It must be put right immediately."

Friday, December 02, 2005

Scots May Get Compensation

Scots May Get Compensation

Scots who claim they have been mis-sold endowment mortgages, may finally be compensated.

They have taken their dispute to Westminster, where MPs have signed a Commons motion demanding an end to a loophole which currently means that Scots who bought policies through lawyers are not due any settlements.

The House of Commons Treasury Select Committee is also calling for urgent action.

Scots who bought endowment policies through solicitors before December 1 2001, do not qualify for compensation from the Financial Ombudsman Service.

This was the date when the Financial Services and Markets Act came into effect.

This also means Scots who were mis-sold endowment policies by lawyers before the 2001 deadline, can only receive £1K maximum payout set by the Law Society.

Thursday, November 24, 2005

Never Ending Debt

Never Ending Debt

According to the Office for National Statistics, approximately 600,000 people over 65 still have a mortgage. This figure means that 10% of pensioners are still paying mortgages.

Apparently many pensioners are remortgaging, at expensive rates, because of a shortfall on their endowment mortgages.

It seems that a lifetime of debt is what many owners of these useless policies have to look forward to.

Wednesday, November 16, 2005

Compensation Shortfall

Compensation Shortfall

The Financial Services Compensation Scheme (FSCS) has said that its budget of 7000 endowment claims for 2005 is massively below reality, the actual level in fact is more likely to be 22000.

This means that it will face a shortfall in 2006.

The compensation scheme is funded through contributions from financial services companies, and is available to those who have endowment policies sold to them by IFA's that have subsequently gone bust.

This is the second year in succession that the scheme has underestimated the number of claims. In 2004 it had to ask the investment industry for an extra £15M, to cover compensation above the original budget of £33M.

It seems that not all the "collapses" of IFA's are as clear cut, as one might expect in an industry that is meant to domonstrate probity and integrity.

Berry Birch & Noble Financial Services ceased trading last year, and its assets were transferred to the almost identically named Berry Birch & Noble Financial Planning.

The firm's liabilities, including any compensation due to investors mis-sold products such as high risk income bonds, have been left with the defunct firm. This means that the FSCS have to pick up the "tab".

Loretta Minghella, FSCS chief executive, said:

"New endowment claims have been received at unprecedented levels, way beyond our expectations. As ever the challenge for FSCS is to strike the right balance between providing an efficient and timely service to consumers with our responsibility to the industry to keep costs under control."

I don't know why they are so surprised at the level of claims, these endowment products simply do not work.

The best solution would be for the life assurance industry to underwrite these worthless, useless, products.

Monday, November 14, 2005

The Price of Justice

The Price of Justice

It is reported that Paul Flynn, a Labour MP, has agreed to pay approximately £36K by way of settlement of a libel action brought against him by Endowment Justice.

Endowment Justice are a complaints handling firm, that specialise in endowment mortgages.

Mr Flynn's solicitor said that the MP was retracting allegations he had made against Endowment Justice.

Endowment Justice launched legal proceedings against Mr Flynn this year, after he criticised the complaints handling firms that work for endowment mis-selling victims.

Although Endowment Justice had held talks in the past with Mr Flynn over its concerns about bad practices at several complaints handling firms, Flynn then went on to name Endowment Justice in accusations he made about the whole sector.

Monday, November 07, 2005

98% To Experience Endowment Shortfall

98% To Experience Endowment Shortfall

The Times reports that Ned Cazalet, of Cazalet Consulting the independent analyst, predicts that about 98% of the 2.7M households with endowment mortgages will suffer a shortfall.

He believes that many companies are still understating the size of the problem, because they are basing projections on an "unrealistic" 6% growth rate.

He notes that the life assurance companies "make a thing of the fact that many policies maturing today are on target, but these policies are only a handful of the total..".


That's a lot of very unhappy people.

Surely that's a large enough number of people, to make it worthwhile to get together in a class action against the life assurance companies?

Tuesday, November 01, 2005

Standard Life Demutualisation

Standard Life Demutualisation

Those of you with endowment policies in Standard Life, may find this article in This Is Money to be of interest.

It explains the effects that the proposed demutualisation of Standard Life may have on endowment policies.

Monday, October 24, 2005

Ever Wondered?

Ever Wondered?

Those of you who are sitting on an unhealthy endowment shortfall, there are estimated to be around 8 million of you, may be wondering why more has not been done by the Financial services Authority (FSA) to bring those who manage these useless polices (ie the life assurance companies) to book.

Well the answer can be found in a speech made, a month ago in Washington, by Sir Howard Davies.

Sir Howard Davies is the director of the London School of Economics, and the former chairman of the FSA.

When he was head of the FSA, Davies decided against playing hard ball with the life assurance industry in respect of their mis-sold and mismanaged endowment mortgages.

In his speech he noted that a more aggressive approach "could perhaps be justified in consumer protection terms". However, it "could well have generated a systemic crisis", because "the amount of compensation politically payable would have threatened the viability of many insurance companies".

In other words he was afraid of the consequences of doing the right thing, because it would hurt the life assurance companies.

A cynic might argue that he was protecting the powerful life assurance lobby, because he was more afraid of them than he was of the hapless consumers who bought these underperforming and useless endowment policies.

Regrettably, it seems, the "old boys network" is still alive and flourishing in Britain.

I assume that Sir Howard, and the life assurance industry did not buy any of these products themselves?

Friday, October 21, 2005

Scottish Endowment Diary

Scottish Endowment Diary

We are not alone, Gail McEwan has just launched the Scottish Endowment Diary.

She is campaigning for fresh legislation which will give consumers who were mis-sold endowment policies by solicitors in 1990's, the same rights of redress as customers of financial services firms.

Quote from her site:

"This is a brand new website and is dedicated to all of you who have been 'ripped off' by Scottish Solicitors. (A Legal Profession who have abdicated all responsibility for the devastating consequences for thousands of Scottish people who have been left in financial distress because of shortfalls in their policies)."

The site can be accessed via this link Scottish Endowment Diary.

Thursday, October 13, 2005

A Day

A Day

A Day, when a new set of pension rules will be introduced, may well have implications for those expecting a shortfall in their endowment policy.

The A Day regulations will replace much of the existing pension legislation, which has been built up over previous decades.

The BBC website has a summary about A Day, and is worthwhile visiting.

I must emphasise that any decisions regarding money should only be made after taking legal and financial advice from suitably qualified, competent and independent legal/financial experts.

Wednesday, October 12, 2005

Standard Life Says It Is On Course

Standard Life Says It Is On Course

Following on from the previous article about the possibility of Standard Life delaying its planned flotation, because of unresolved issues with the FSA, Standard Life has stated that its plans are on track.

The FSA was reported to have been scrutinising Standard Life's liabilities for its mortgage endowment promise and its endowment complaints, and would need to be satisfied "by the end of this month" if the flotation timetable was to be met.

Standard Life have stated:

"The FSA and Standard Life are in continual dialogue, and that will take place up until the company's IPO (initial public offering.

Any changes that the company has put in place over the last year, the FSA must continuously be satisfied that it can meet its obligations

They then went on to note that the endowment complaint issue was "a red herring".

They hold a provision for meeting their endowment promise of £393m.

The mortgage endowment promise was introduced in September 2000.

It promised that for the 770,000 customers who faced a shortfall at that time, the deficit would be made up by the insurer, providing underlying assets grew by at least 6% a year after tax.

Those whose policies went into the "amber" or "red" zone after September 2000 were never covered, but the 65,000 whose policies mature before the end of this year will still be topped up in full.

However, Standard Life reneged on its promise; top-ups will still be applied to the remainder, but limited to between 40% and 60% of what was promised.

Monday, October 10, 2005

Standard Life Float Delayed

Standard Life Float Delayed

It is reported that Standard Life's flotation might be delayed until 2007, due to outstanding issues with the Financial Services Authority (FSA) over endowment mortgages.

The float was originally planned to happen in 2006. However, the FSA is reported to be seeking assurances from the company over a number of issues; including allocation of capital and how much new money they want to raise.

Specifically the FSA want clarification over assurances that Standard Life gave last year, when it announced that it was unable to fulfill its mortgage promise to 600,000 holders of endowment policies.

Standard Life also set a deadline of May 2006 for considering mis-selling complaints over endowment policies, this hits 350,000 endowment policy holders.

Standard Life has set aside £393m to pay top-ups to policyholders facing shortfalls.

However, customers whose endowment policies mature after the end of this year will receive only 40%-60% of the top-ups.

You will recall that the FSA and Standard Life had something of a run in earlier last year; the dispute, over the measurement of its solvency, forced Standard Life to change its chief executive and reverse its long-standing opposition to demutualisation and sell £7.5bn of equities.

What goes around comes around!

Tuesday, October 04, 2005

MP Acts

MP Acts

Sandra Osborne, a Scottish MP, has promised to act and to try to help thousands of house owners who have been mis-sold mortgage endowment policies.

Sandra Osborne helped bring in new rules governing the sale of endowment policies by banks and building societies.

She said that she intended to lobby the government to help the thousands of people who have been mis-sold the same policies by their solicitor.

She was prompted to act after listening to BBC Radio Scotland's series, The Investigation.

The show explained how many people, who were mis-sold these policies in the 1980's and 90's by banks, building societies and other financial institutions, have successfully claimed compensation for performance shortfalls.

However, it seems that Scots who were sold identical policies by their solicitor when buying their homes have virtually no hope of being compensated for their losses.

The programme featured Gail McEwan, who is running a campaign to win compensation for people in Scotland.

If you think you have been mis-sold an endowment policy by your solicitor and want to join Gail McEwan's campaign to get parliament to act, you can contact her at PO Box 19582, Johnstone.

I wish her every success.

Monday, September 19, 2005

New Forum

New Forum

The financial services industry is supporting a new forum to improve the quality of products and services provided to the retail investor.

The Retail Financial Services Forum will bring together representatives of banks, insurers and financial advisers to test out new ideas and initiatives and to promote best practice.

It will meet quarterly, starting on October 21, and will publish details of its deliberations on the internet.

Monday, September 12, 2005

Campaign Launched

Campaign Launched

Gail McEwan from Scotland is planning to mount a nationwide campaign for justice on behalf of hundreds of Scots, allegedly missold mortgage endowments by solicitors.

She has been awarded £700 in compensation by the legal services ombudsman, after the Law Society of Scotland bungled her own complaints about a policy she was sold by a Glasgow firm of lawyers.

However, she still has a shortfall which she wishes to be made good.

She plans to pressure MSPs, and the Scottish Executive, for fresh legislation which would give consumers who were missold endowments the same rights of redress as customers of financial services firms.

The Herald has the full details here.

I wish her the very best of luck.

Thursday, September 08, 2005

It's An Ill Wind..

It's An Ill Wind...

As the saying goes, "it's an ill wind that blows nobody any good". This certainly appears to be the case for Avalon, a firm of solicitors based in Warrington.

Whilst those of you who hold underperforming endowment policies may be wondering how to pay off the shortfall, Avalon are doing rather well out of the crisis.

Avalon is headed by former TV presenter, Andrew Nulty, and has recently opened a second office. Its turnover is now £5m for the 12 months to the end of July.

Mr Nulty, who presented "Hitman and Her" before setting up Avalon in Manchester four years ago, is confident that fee income will reach £15m over the next year as the firm's caseload is expected to increase.

Avalon switched from being a personal injury practice, to one specialising in industrial disease (eg mining compensation claims) and financial negligence cases.

Mr Nulty is leading a team of 30, who are acting for thousands of people who claim to have been mis-sold endowment policies.


"We saw a niche in the market. We are representing thousands of people who are facing shortfalls on their endowment policies.

Our role is to recoup their losses from the insurance companies, and we take a percentage of the money they receive as a fee

Monday, September 05, 2005

Higher Fines Urged

Higher Fines Urged

Which?, the consumer group, is urging the Financial Services Authority (FSA) to significantly increase the fines it imposes on companies found guilty of mis-selling; in an attempt to crack down on the financial services industry.

Which? says that it wants the Financial Services Authority to levy penalties that are big enough to alarm institutional investors that own shares in the companies facing fines.

Which? believes large penalties would persuade investors to put pressure on financial services companies to prevent mis-selling.

Not a moment too soon in my view.

Monday, August 29, 2005

Further Endowment Confusion

Further Endowment Confusion

As if endowment policy holders were not confused and worried enough, there is now a report that suggests that some of the warnings of shortfalls may in fact be wrong.

According to Independent Financial Adviser, Alan Lakey of Highclere Financial Services, not all endowments linked to a mortgage, where red or amber warning letters have been issued, will suffer a shortfall.

In a report in Money Management magazine, he warns that some are being sent out where no real risk exists.

"What began as an exercise designed to advise policyholders of the probable maturity value of their plans, and the possible need to take remedial action, has since turned into a major bloodletting,".

Lakey makes the point that the typical reprojection letter appears to show the with profit endowment as off track, and unlikely to hit the relevant target. However, he points out that not all red or amber warning letters are issued on the same basis.

He also notes that the deluge of warnings has led to the creation of a compensation industry, designed to extract money from the hapless policy holders.

To my view the best way for the life assurance industry to restore some of their shattered credibility, and brand value, would be for them to unconditionally underwrite their endowment products.

This would, at a single stroke, eliminate the need for a compensation industry which is living off the misery of policy holders.

Tuesday, August 23, 2005

Standard Life

Standard Life

Nice results from Standard Life.

Standard Life announced a 4% rise in first-half revenues today, as business improved in its home market, boosted by new personalised pension plans.

The insurer, which is expected to float next year, said insurance sales for the first six months of 2005 rose from £593M to £619M and sales of life products and pensions in its key home market rose 10% to £459M.

I wonder if their endowment policy holders are also feeling pleased?

Thursday, August 18, 2005

Selling Endowments

Selling Endowments

The Scotsman has some interesting background material about selling endowment policies, see Selling Endowments.

However, as they warn, this does not constitute investment advice and you should seek independent financial advice if you are unsure as to the suitability of any investment for your circumstances. Past performance is not an indication of future performance. The value of investments may fall as well as rise and you might not get back the full amount invested.

Monday, August 08, 2005

Standard Life Fails To Deliver

Standard Life Fails To Deliver

According to new figures, those people unfortunate enough to have an endowment policy maturing with Standard Life this year will not only miss out on any windfall but have had to endure a further decline in their investments over the past year.

It seems that Standard Life's useless endowment policies have produced a negative return of 2.7% this year.


The figures were revealed as Standard Life unveiled its mid-year "bonus declaration", and made a useless attempt to focus attention on one-year returns of existing policies rather than the year-on-year change for maturing policies.

I think that it is time for the hapless holders of these useless, and underperforming, polices to act up.

Friday, August 05, 2005

HBOS Increases Provisions

HBOS Increases Provisions

HBOS has reported an interim six month profit of £2.2BN, an increase of 15%.

In view of this success HBOS has set aside an other £130M, on top of the existing £130M already set aside, to cover claims for endowment policy misselling.

HBOS increased their dividends by 9% to 11.75p.

Monday, August 01, 2005

From Bad To Worse

From Bad To Worse

The endowment policy crisis could be far worse than experts expect.

That is the view of Clive Cowdery, chief executive of Resolution Life. He predicts that the amount of assets held in close funds funds will double to £400BN, in the next five years, as more insurers shut off their funds to new money.

Closed funds do not take in contributions, their only purpose is to pay existing liabilities; in other words they are winding down, as such their returns are lower than open ones.

Cowdery believes that closed funds will account for 15 million policies by 2011.

That will be when the "fun really starts"; as people realise that their funds don't work, and wake up to the fact that they have a debt that they cannot afford to settle.

I would hope that, despite the fact that the life assurance companies are doing their best to sweep the biggest financial scandal of the 20th century under the carpet, people wake up to this disaster a little earlier than that.

Time for the politicians to wake up as well!

Thursday, July 28, 2005

Mortgage Advisory Centre In Liquidation

Mortgage Advisory Centre In Liquidation

Mortgage Advisory Centre, based in Edinburgh, run by Robert McGrail, a businessman and shareholder in Hearts football club, has reportedly gone into liquidation.

The Financial Services Authority is expected to issue a statement about the firm, within the next few days. It is unclear how many customers have complained about endowment mortgages sold by the company.

Mr McGrail is reported to control the independent broker First Mortgage Direct.

Tuesday, July 26, 2005

Misery For Scottish Widows

Misery For Scottish Widows

Bad news for those of you who hold with-profits policies with Scottish Widows, the maturity values of these policies have fallen again; despite the recovery of equity markets.

The value of an average 25-year with-profits contract has dropped in the past six months, rather worrying given the fact that the stock market has been rising.

Scottish Widows said that payouts were lower because funds were invested over different time periods, yielding different earnings.

It still expects its £18BN with-profits fund to produce a pre-tax investment return of 15% in the 12 months to end-June, compared to 7.3% in the same period the previous year.

However, the company warned that maturity payouts could continue to fall, even in years where positive investment returns were achieved.

The Widows have tried to explain the reason for the fall as being due to the returns on with-profits, which aim to smooth payouts by holding back some of the return in good years to pay out in the bad, as being historically "significantly higher" than those of late.

To my simple view that means that they were paying out too much in earlier years, and not applying the "smoothing principle" properly.

Now there are two possible reasons for this:

1 Poor management of the policy

2 Deliberate over payment to attract new customers and shareholders

A typical 25-year endowment with Scottish Widows, maturing on 1 August, dropped 2.8% on February and 7.4% on the year. A mortgage-linked endowment over the same period fell 2.8% in value since February and 8.1% over the past year.

Thursday, July 21, 2005

Endowment Complaints Rise In Scotland

Endowment Complaints Rise In Scotland

The number of complaints to Scotland's legal watchdog rose by more than a quarter last year, from 395 to 505, arising from the mis-selling of endowment policies.

See The Herald.

Monday, July 18, 2005

Complain Now

Complain Now

Research carried out by the Financial Services Authority (FSA) shows that over a million households feel they have a case for making a complaint for mis-selling, in relation to their useless and underperforming endowment policy.

However, they haven't yet done so.

Come on people, get off your backsides and take action!

Make the life assurance companies pay for their mismanagement of your money.

Monday, July 11, 2005

The Can of Worms

The Can of Worms

It seems that the "dear old" life assurance companies, who manage the underperforming and useless endowment polices that are held by over 8 million people, are not content with the damage that these products have done to their reputations.

As if to further dig the knife deeper into this self inflicted wound, some of them are not spelling out clearly enough the time bar deadline on their "red warning letters".

That is at least the view of solicitors Beresfords, from Doncaster, who say that many "red letters" are failing to give adequate warning to policy holders about the time deadline for complaining.

Beresfords is preparing a report on the time limit issue to send to the Financial Ombudsman Service (FOS), and the insurers which sold endowments. They state that up to half of the red warning letters do not identify the deadline.

Martin Ryan, the firm's compliance and regulation officer, is quoted as saying:

"In 50 per cent of cases there don't appear to be valid time bars..There seem to have been a lot of incorrect red letters going out - specifically not drawing the attention of the client to take action or setting no date by which action had to be taken."

Some insurers, ever mindful of their obligations to themselves, are using time bars as a blanket reason not to examine complaints sent to them.

The FSA will hold a meeting of industry bodies, this Friday, to discuss proposals on endowment compensation. It is expected to present research on how claims have been handled, which is believed to cast financial advisers and insurers in a poor light.

It is very clear that the life assurance industry is "closing ranks" on this issue, and will do everything it can to avoid facing the unpalatable truth that it has sold a product that was not fit for purpose.

Endowment polices, that are meant to pay off mortgages, do not work.

It is as simple as that.

As such the life assurance companies should underwrite them.

The life assurance companies whilst trying to bury their heads, and the heads of their policy holders, in the sand over this disgrace will face rather rude shock.

Raymond Donn, senior partner of law firm Donns in Manchester, is quoted as saying:

"We intend to challenge the time bars when the insurance companies start invoking them next year. A lot of people who have mortgages don't know if there is going to be a shortfall."

Martin Ryan, of Beresfords, believes that the industry will try to avoid precedents being set in court.

"At the moment we are talking of industry-imposed time bars..But if a judge got into it, a can of worms could open up for the industry. It would be the first time a judge ran the rule over it. And the industry could find that, in some areas, they might not be able to use time bars at all."

The life assurance industry is learning, whether it likes it or not, that reputations are hard to earn, but easy to squander.

Monday, July 04, 2005

Time To Sue

Time To Sue

It seems that the life assurance industry is guilty of a "being economical with the truth" in trying to persuade their hapless policy holders that once the time bar is down, they have no further rights to claim compensation.

The Observer reports that endowment policy holders still have the right to sue the life assurance companies in the courts.

Not surprisingly the life assurance industry, the same people who sold and mis-managed these useless products, is reluctant to remind people of their rights to sue.

Lawyer Adam Samuel, formerly the Personal Investment Authority Ombudsman, is quoted as saying:

"If anyone took one of these cases to court, the consumer would very probably win. The industry is terrified of this."

The life assurance industry is loath to allow a legal precedent to be set, that could cost billions.

As I have repeated many times on this site, what is actually needed is for there to be a class action taken by the 8 million holders of these useless, underperforming, products.

That will be the most efficient, and effective, method of ensuring that the life assurance industry addresses the failure and mismanagement of these products.

Thursday, June 30, 2005

Endowment Complaints Quadruple

Endowment Complaints Quadruple

The number of claims being made by people who hold useless and underperforming endowment policies, has risen dramatically.

The Financial Ombudsman Service (FOS) has said that it received 70,000 new complaints about endowment mortgages last year.

That is four times as many as it received three years ago.

The FOS expect that the level of complaints will increase; as people received re-projection letters, which will warn them that their policies are going to fail.

Walter Merricks, chief ombudsman, is quoted as saying:

"The number [of disputes] we can expect to receive in the current year will largely be determined by how financial services firms meet the new regulatory requirements on so-called re-projection letters."

The FOS noted that the Financial Services Authority (FSA) had found evidence of serious shortcomings, by some firms, in the handling of endowment complaints.

As noted before, people should be going to jail for this.

Wednesday, June 29, 2005

Norwich Union Raises Bonuses

Norwich Union Raises Bonuses

In a rare piece of good news, for some of those holding endowment policies, Norwich Union has announced that it will be raising bonuses on some of its with profits endowment policies.

This will be the first increase since 1991, that fact alone shows just how badly endowment policies have been performing.

As noted many times before; why were these polices, when they were obviously failing, still sold by the life assurance companies?

Norwich Union said that it had decided to raise the rates paid on certain with profits policies in the CGNU (which includes General Accident) and CULAC (Commercial Union) funds, on those with profits policies taken out before October 1998.

The bonus rates will be increased from 1% to 2% in the CGNU fund, and people in the CULAC fund will be paid 1.5% compared with 0.5% previously.

Norwich said all other bonus rates would remain unchanged, and that there would be no changes to the value of maturity payouts or the current levels of "market value reduction".

Monday, June 27, 2005

Scottish Test Case

Scottish Test Case

The Herald reports that a Glasgow financial advisory firm is planning a legal test case, on behalf of nearly 100 clients allegedly mis-sold endowment policies by Scottish solicitors.

Macarthur Denton Asset Management accused lawyers of a "disgraceful" failure to fulfill their professional responsibilities, alleging that they have "collectively shrugged their shoulders" when pressed for compensation.

I personally believe that the best way forward, for the 8 million of us who hold these useless and underperforming policies, is for there to be a class action.

Monday, June 20, 2005

Closed Funds

Closed Funds

Many endowment policy owners hold policies in closed funds, around £160BN is tied up in these funds.

Closed funds are funds that are closed to new business.

These funds, because they are closed, do not have the same incentive to try to show a good return on their funds and thus attract new investors.

Policy holders are faced with the dilemma of choosing between staying with the fund or exiting, and thus incurring exit penalties.

The Telegraph discussed these issues in a recent article. You can read it via this link Closed Funds.

Tuesday, June 14, 2005

Standard Life "Merely Following Orders"

Standard Life "Merely Following Orders"

It seems that Standard Life is getting rather a rough press these days, over its endowment policies.

Standard Life is now facing calls to compensate up to 100,000 mortgage endowment holders, for failing to disclose the full extent of charges levied on their endowment policies.

The hapless holders of their Homeplan policies are now facing 12% shortfall on their policies, because of a charging discrepancy.

Which? is leading the calls to compensate victims of this debacle; other companies (Norwich Union, L&G, Scottish Widows and Axa) which sold policies, with similar charging structures, have topped up their own clients' investments.

Standard Life used "standard charge projections", specified by the regulator, to calculate its premiums. However, the actual charges were up to 10% higher.

Standard Life claim that they have done nothing wrong.

A spokesman said that they were merely following industry guidelines at the time.

Doesn't that, "merely following orders", have a familiar ring to it?

Friday, June 10, 2005

FT Article

FT Article

My thanks to Ben for forwarding me this article, that appeared in the FT on the 7th of May.

"The most successful blogs appear to be first and foremost exercises in 'personal branding'. One such blogger is self-styled 'living brand' Ken Frost, who has a huge personal blog and an equally lengthy one (some 205 pages) detailing every twist and turn of the mis-sold endowments debacle and his claim for compensation."

Monday, June 06, 2005

Standards Life's Endowment Debacle

Standard Life's Endowment Debacle

Further to my earlier article about Standard Life's failing Homeplan endowment policy, it seems that the shortfalls on this useless product will be more than previously thought.

It seems that the value of many of the company's Homeplan policies, sold in the early 1990s, could be as much as 12% lower than the amount originally estimated.

It is estimated that the losses could exceed £250M.

The reason?

Standard Life set its premiums at an artificially low level in order to attract new business.

Standard Life are continuing to reject demands that the company compensate those who face shortfalls.

Well they would, wouldn't they?

A Standard Life are quoted as saying:

"At the time it was launched, Homeplan was an innovative and popular product. The innovative flexibility offered by Homeplan meant it was an immediate success and helped tens of thousands of people onto the property ladder."

Not much comfort to those facing a shortfall now though is it?

As I have repeated, time and time again, what is the point of an endowment policy if it is not going to pay off the mortgage?

People would not have taken these useless policies out if they didn't think that they would work.

In other words, it is the duty of the life assurance companies to underwrite these policies.

Standard Life are keen to blame the independent financial advisers (IFAS) for their mess. They are reportedly saying that the way the product was designed meant that IFAS, who were responsible for selling Homeplan policies at the time, could themselves decide the level of premiums that their clients should pay.

Janet Walford, editor of Money Management, politely says that this is of course bollocks:

"This just does not seem logical to me. Life offices price their policies on complex actuarial assumptions, including underwriting risk, assumed performance and charges. How would an IFA know what to charge? It's madness."

Other life insurers, have realised the error of their ways and have quietly paid compensation to their policyholders in a similar position.

The list of recalcitrants includes; Scottish Widows, Axa, Clerical Medical, Legal & General, Norwich Union and Canada Life.

Tuesday, May 31, 2005

Standard Life Faces £50M Compensation Claims

Standard Life Faces £50M Compensation Claims

Standard Life is facing calls to compensate up to 100,000 mortgage endowment customers, whose charges are much higher than those they were quoted at the time and who are likely to face shortfalls when their policies mature.

The shortfall, for those who took out Homeplan endowments between 1991 and 1994, could be £50M.

Which? made the call for compensation. It seems that up to 11 other companies, which sold policies with similar charging structures to that of Standard Life have been topping up their own clients' investments.

The Financial Services Authority (FSA) is reported to have carried out a review in 2001, that found that a number of companies had been engaged in "pre-contractual mis representation and in some a breach of contractual warranty".

The companies that have admitted they have paid redress to tens of thousands of their customers include Norwich Union and Legal & General.

Which? contend that Standard Life were doing the same thing, and as such should compensate their customers.

Standard Life, which intends to float on the FTSE in 2006/7, has 2.6M with-profits policyholders.

During 1988 and 1994 Lautro, the insurers' watchdog, required its members to give "standard charge projections" in their product literature; based on an industry-wide "average" of how much a product might cost and how much it might pay out, based on presumed level of growth.

The figures turned out to be garbage, in fact they were misleading, like everything else concerned with these endowment products.

The charges levied were higher than those set out, ie the customer was not being given the facts.

The insurers, like the Nazis, argue that they were simply following the regulator's orders!

Standard Life claim that the figures "in no way formed a part of the contract [and] charges could change over the term of the policy".


So what on earth was the point of them then?

Insruance companies used the misleading figures to charge customers. Hence they could pretend to be more competitve than others.

Following talks with the FSA, L&G agreed to top up its policies. Norwich Union says it did the same with 10,000 policies it inherited, when it took over Provident Mutual.

Am I the only person to think that endowment policies were the biggest con trick perpetrated on the British public in the 20th cetury?

To my view, people should be going to jail over this scandal.

Friday, May 27, 2005

Legal and General Have Fine Cut

Legal and General Have Fine Cut

Legal & General Group (L&G) have had their fine for misselling mortgage endowments cut in half in a ruling that criticised the FSA.

L&G will now pay a £575K, the Financial Services and Markets Tribunal said in a decision posted on its Web site.

The original fine was £1.1M.

The ruling said that the insurer was "justified in feeling aggrieved" about the FSA's probe. The watchdog used a report from PricewaterhouseCoopers LLP as the basis of its case when it should have used its own evidence, the ruling said.

L&G was the first life assurance company to appeal against an FSA penalty, this may encourage other companies to challenge the regulator's decisions.

Abbey National was fined £800K by the regulator for mishandling complaints from endowment clients.

Maybe they could employ one of these endowment compensation firms to help them?

Thursday, May 26, 2005

The Shabby Habit

The Shabby Habit

Abbey, the mortgage lender, has been fined £800K by the Financial Services Authority (FSA) for mishandling complaints from its customers over endowment policies.

The FSA also accused Abbey of giving it inaccurate information, while failing to treat its customers fairly.

The FSA said Abbey mishandled about 5,000 complaints between October 2001 and September 2003.

Seemingly Abbey rejected 3,500 complaints that should have in fact been upheld.

The FSA are quoted as saying:

"By putting its own interests ahead of those of its customers with a mortgage endowment complaint, Abbey has singularly failed to treat its customers fairly,"

Abbey said it accepted that its complaint procedures for endowment products were inadequate, and said it was reviewing all complaints from the period and would pay compensation where appropriate.


"Abbey takes this extremely seriously and continues to fully review its complaints handling policies and procedures,".

Abbey said it was re-evaluating about 50,000 complaints made over the past five years, and would be writing to the customers affected by 22 June.

So there you have a nice example of a leading brand name, not treating its customers fairly.

I wonder how many others have acted in the same way?

Monday, May 23, 2005

Standard Life's Secrecy

Standard Life's Secrecy

It seems that some life assurance companies, despite happily trumpeting their endowment payouts a few years ago, now try to keep their hapless policy holders in the dark.

Maybe it is something to do with the fact that these policies are useless?

One firm that has employed this "Orwellian" technique of information management is Standard Life.

Its with-profits policyholders have been receiving annual statements which do not disclose the policy's estimated terminal bonuses.

This information restriction was introduced in 2003. Seemingly, Standard Life believe that too much information will confuse policy holders.

Sorry, but what utter nonsense!

How stupid do they think we are to fall for that excuse?

However, after pressure from financial advisers, Standard Life finally relented; they are now "allowing" their policy holders the opportunity to find out how badly their policy is performing.

Unfortunately this "generous" release of information is not as "generous" as it may seem. The hapless policy holders will only be able to find out about the failings of their policies, if they ask an independent financial adviser.

Standard Life won't give the policy holders the information directly!

It seems that the life assurance industry is still treating us, the hapless policy holders, with contempt.

Wednesday, May 18, 2005

Traded Endowment Policies

Traded Endowment Policies

There is quite an interesting article in The Telegraph, about traded endowment polices (TEPS).

TEPS is the market for buying and selling second endowment polices.

Tuesday, May 10, 2005

Money For Old Rope

Money For Old Rope

The third party complaint handlers, that do the work that endowment complainees are well able to do themselves, managed to rake in £12M in fees last year.

These companies can charge up to 50% of the compensation awarded, just for filling in the same paperwork that the endowment policy holder should complete himself.

This "easy money" scheme is now being put under pressure by the life assurance companies.

Prudential and Norwich Union have stopped paying compensation for endowment mis-selling to unregulated claims-handling firms.

The Prudential will no longer pay compensation directly to these firms. Instead it will send payments to their clients, who can chose whether or not to pay the intermediary. Norwich Union is understood to have taken a similar stand.

Consumers claiming they were mis-sold an endowment policy by the direct sales forces of the Prudential and Norwich Union are instead being urged to go directly to them.

Sunday, May 08, 2005

Endowment Crisis Worsening

Endowment Crisis Worsening

It seems that things are lurching from bad to worse in respect of the performance of the underperforming and useless endowment policies, held by 10 million people in the UK.

It is reported that over 50% of all policies, due to mature this year, will not meet their targets.

Norwich Union said that 19,000, or 58%, of its 33,000 policies will fall short this year.

Standard Life said that over 14,000, or 47%, of its 30,000 policies maturing this year will fall short.

That did not prevent Sir Brian Stewart, chairman of Standard Life, from deluding himself and others last week by saying that endowments were "not all bad"; in fact he was even predicting that they would make a comeback!

Scottish Widows is expecting that 2/3rds will not meet their targets this year.

L&G didn't seem to have any figures, they were not "readily available", how reassuring!

However, Prudential said that none of its 8,376 policies due to mature this year would fall short.

Maybe Prudential has something to teach the other life assurance companies, as to how to manage an endowment fund?

Wednesday, May 04, 2005

Time Bar To Bring Chaos

Time Bar To Bring Chaos

Life assurance companies, who sold underperforming and useless endowment policies to 8 million home owners, are using a number of methods to reduce the claims being made against them for compensation.

One such method is the time bar, whereby claimants are given a deadline to complain or lose their right to do so for ever.

This neat little trick is allowed by the Financial Services Authority (FSA), which said that an insurer may disregard a case for mis-selling three years after a policyholder receives the first "red" letter warning that an endowment has a high risk of not meeting its target.

Needless to say, there is now a deluge of complaints swamping the system.

Many hundreds of thousands of red letters were sent out in early 2003, this means that the deadline is now fast approaching for these people to make a claim.

The deluge has been further exacerbated by the fact that the FSA has told the life assurance companies that they must remind people 6 months before the final deadline, as to their right to make a claim.

Needless to say the life assurance companies and the Ombudsman will be hard pressed to cope with this deluge of complaints.

It has taken me over two years to reach the final stage of my claims which, for the record, were both rejected.

Simply put, the system can't cope!

This problem is exacerbated by the fact that, according to Chief Ombudsman Walter Merricks, 45% of endowment mis-selling cases were upheld by his office after being turned down by life companies.

These companies are reportedly issuing time bars:

Norwich Union - it has 1M endowment policyholders. It began warning of a time bar last October, giving 12 months' notice.

Standard Life - it has 1.2M endowment policyholders. It will write to customers in coming weeks to remind them about its deadline, giving 12 months' notice.

Royal & SunAlliance - it has 450K policyholders. It began reminding policyholders about time-barring last May and gives policyholders six months to complain after a second red warning letter.

Allied Dunbar/Eagle Star - it has 100K policyholders. Policyholders have 12 months to complain after receiving second letter.

Friends Provident - it has 450K policyholders. They have imposed a three-year time bar after policyholders receive their first red letter.

Pearl/NPI/London Life - it has 100K policyholders. Time barring applies three years after the first red letter.

Axa - it has 160K endowment policyholders. It introduced time-barring last month and is writing to customers giving 12 months' notice.

Scottish Widows - it has 165K endowment policyholders. It introduced time-barring in February, giving customers 12 months to complain after receiving their second red letter.

Good luck!

Tuesday, May 03, 2005

Lazy Claims

Lazy Claims

Prudential, one of the UK's biggest sellers of endowment policies, is to refuse to pay "claims handlers".

These companies, which are unregulated, take on customers' mis-selling claims in return for up to 50% of the compensation payouts.

The market for claims handlers has grown rapidly over the past year, as many of the 7m endowment holders realise they may be entitled to compensation.

The simple truth is, people are using these companies because they are lazy.

Make the claim yourself, and save the fee!

Wednesday, April 27, 2005

Sir Brian Stewart's Deluded View of Reality

Sir Brian Stewart's Deluded View of Reality

Sir Brain Stewart, chairman of Standard Life, gave an interview recently in which he expressed the desire to bring back the endowment policy.

He went on to say that endowment policies "weren't all bad news", and that they had "worked for a lot of people".

I have to ask, I wonder on which planet Sir Brian is exactly residing?

There are currently 8 million people facing a shortfall on their useless and underperforming endowment policies.

Does he seriously think that this shows that these unloved and useless products work?

Let us remind ourselves of some of the problems with these products:

1 They don't work

2 The commissions being charged by the life assurance companies further reduce their value

3 Many of the life assurance companies mismanaged them, so that their returns are even worse than the norm

4 Many life assurance companies paid out too much in the way of bonuses in the late 80's and early 90's, in order to attract new customers and to prop up their share price.

The result?

The funds were stripped bare of reserves, for the leaner times ahead.

5 Many of the life assurance companies are doing their level best to hinder the compensation process, hardly a sign of integrity or honesty

6 There are very strong rumours that many life assurance companies knew, as early as the late 80's, that the policies would fail. Yet they sat on their hands and did nothing!

The above points, and they are not exhaustive by any means, clearly show that the reputation of the products and the companies that sold them have been irreversibly shot to pieces.

The above should give any level headed individual good cause to think twice before re-inventing these useless products.

Sir Brian please take note.

Tuesday, April 26, 2005

Fines All Round

Fines All Round

The Financial Services Authority (FSA) has issued a warning that up to 10 endowment firms face disciplinary action, for refusing to pay adequate compensation to customers who were mis-sold policies.

It seems that these 10 firms are still flouting FSA guidelines, which were drawn up 4 years ago, on the handling of endowment complaints.

The FSA is quoted as saying:

"In January we warned the small number of firms that were still not handling mortgage endowment complaints adequately to improve the standard of their work or risk enforcement action. Intensive work is ongoing and the time for these recalcitrant firms to lift their game is certainly short."

It is reported that Abbey National is on the list.

The FSA has already fined Friends Provident £675K and Allied Dunbar £725K for mishandling complaints, in the last 18 months.

Is it any wonder that people have lost confidence in the providers of these worthless products?

Monday, April 25, 2005

Insurers Bite Back

Insurers Bite Back

Following on from the drubbing that the Financial Services authority (FSA) received from the Financial Services and Markets Tribunal, in its case against L&G, insurers have been quick off the mark to bite back.

Insurers have demanded that the FSA "improve" its investigation and enforcement procedures.

The Association of British Insurers (ABI) have accused FSA staff of building cases against insurers, to send a tough message to the market.

The FSA is reviewing its investigation procedures, after Legal & General had a fine for mis-selling cut on appeal.

The FSA said it would "consider" the ABI's views and respond in July.

The ABI said that the FSA's Regulatory Decisions Committee (RDC), the body which oversees enforcement, needed to be more open with firms under investigation.

The ABI said:

"There is a perception that FSA enforcement staff are often intent on delivering a particular message to the market and seek to build a case... to support that message..".

Needless to say, whatever the outcome of this spat, it will not be benefit the holders of worthless endowment policies.

Wednesday, April 20, 2005

News From The Pru

News From The Pru

The Life insurer Prudential reported an 11% increase in first-quarter sales today.

This is in line with forecasts, and hence allowed it to reiterate its positive outlook for its organisations based in Asia, the United States and Britain.

Revenues for the first three months of the year were £478M vs £433M in 2004.

The consensus forecast sales had been £477M.

Will this help those with endowment policies?


Wednesday, April 13, 2005

Abbey To Be Fined

Abbey To Be Fined

It seems that Abbey, owned by Banco Santander, is to be fined by the Financial Services Authority (FSA) over its endowment mortgage complaint procedures.

The FSA are now punishing providers for not only mis-selling endowment products, but also for failing to handle the complaints properly.

There have been two firms fined to date for mishandling complaints, Allied Dunbar and Friends Provident, both of which were fined £700K.

Despite warnings from the FSA it seems that a number of providers are content to ignore their duty to investors.

In other words, some life assurance companies don't "give a stuff" about the policy holders.

Complaints to the Financial Services Ombudsman are expected to pass 65,000 in the year to April 2005, and more than 700,000 policies are surrendered short of maturity each year.

Sunday, April 10, 2005

The Gestation Period of An elephant

The Gestation Period of An Elephant

Taking, what I can only describe as, the gestation period of an elephant; my "professional" claims handling firm has finally come back to me on the complaint that I raised around a year ago, in relation to the mis-selling of my first endowment policy.

They state that they have received notification from my policy provider that it was sold to me by an IFA, they knew this already, and "due to the current rate of success in this type of complaint (it was sold pre 1988) we do not feel that we can help you".

This response, in a nut shell, shows you why complaint handling firms are in general a waste of space.

In effect the service that they are really only prepared to offer is that of filling in paperwork, that you could well do yourself, and raise the matter with the life assurance provider and the FOS.

They are then happy to take 30% of any compensation that you receive, for their "endevours" on your behalf.

The bottom line is that you can save yourself this 30% fee, by doing precisely the same work for yourself.

The only way that they can conceivably add value is where you have already taken these actions yourself, and got nowhere, just as I did.

Unfortunately, as we can see, they are not prepared to help.

I am of course more than happy to hear from any complaint handling company that would actually like to do some real work to earn its fee.

Tuesday, March 29, 2005

Sweeping It Under The Carpet

Sweeping It Under The Carpet

Walter Merricks, chief of the Financial Ombudsman Service (FOS), is reported to have said that complaints about mis-sold mortgage endowments occupy most of his time.

They received 70000 last year.

He is predicting that this level of complaints will continue at least for another 18 months. However, they will then decline as the FSA six month time limit for complaints kicks in.

Some cynics might argue that this time limit was the FSA's method of getting the life assurance companies off the hook, in respect of their obligations to provide a product that actually works.

I have a feeling that this problem will not so easily be swept under the carpet.

Wednesday, March 23, 2005

Abbey's Curate's Easter Egg

Abbey's Curate's Easter Egg

Abbey has presented its with profits policy holders with something of a curate's egg for Easter.

Despite benefiting from improved investment performance on with profits funds, Abbey will pay no annual bonuses on Scottish Provident, Abbey National Life and Scottish Mutual policies.

How nice of them!

However, they are going to reduce Market Value Reductions (MVR's), the penalties for early surrender, for some policyholders and reintroduce terminal bonuses on some long-term policies.

Abbey's Scottish Provident fund had a return of 10.5% last year, with Abbey National Life and Scottish Mutual showing 9.5% for the same period.

MVR's have been reduced by 6%. As noted, there are no annual bonuses declared for 2004, except where the policies carry guaranteed bonuses.

Scottish Mutual's traditional 25 year maturing endowments now pay a terminal bonus of 30%, an increase of 5%. The 15 year policies now receive a 5% terminal bonus, no change on the previous period.

Abbey National Life 10 year pension plans receive a 5% terminal bonus, introduced for single premium policies, and 1% for regular premiums. Scottish Provident?s 20 year endowment terminal bonus goes up from 0% to 7%.

These "improvements" are on the backs of large cuts in the past. So don't bother getting the champagne out!

At this rate, if MVR's continue to decline, investors will at least be able to take their money out and put it somewhere more useful instead.

At the end of the day endowment policy holders are being screwed left, right and centre!

Friday, March 18, 2005

Another Nail In The Endowment Coffin

Another Nail In The Endowment Coffin

Gordon Brown has managed to bang another nail into the endowment coffin, by adding a new tax on with profits funds.

If this tax is implemented, it will reduce the sums of money available to pay bonuses on with-profits policies.

In other words the already useless endowment policies will be further undermined, and pay out even less money to the hapless holders of these policies.

Gary Withers, chief executive of Norwich Union Life, is reported to have said:

"As we said to the Treasury in December, this is simply a piggy bank raid on the funds that support our customers' savings policies. One of the most effective ways to destroy confidence in savings is to introduce arbitrary tax raids on savings vehicles. We will continue to oppose this stealth tax in the interests of protecting our customers. I would again urge the Treasury to review their proposals in order to promote confidence in long term savings."

Brown started his assault on Britain's savings, when he made a £5BN a year charge on pension funds in 1997.

The new tax will lead to an increase in the tax burden on the free reserves supporting with-profits policyholders' funds.

Peter Vipond, head of financial regulation and taxation at the ABI, is quoted as saying:

"We remain very concerned about the government's intentions in this area. This proposal would represent a significant extra charge on with-profits policyholders and contradict the government's desire to encourage more saving in Britain...We are currently in detailed discussions with the government and negotiations have not concluded. We are determined to do all we can to prevent a rise in taxation on these savings products..".

Up until now, life companies have paid a 20% tax on life fund surpluses and no tax at all on pension fund surpluses. The chancellor is proposing to impose a 30% tax on both these surpluses, which means that there will be less money available to pay bonuses to policyholders.

The bottom line is that we, endowment policy holders, are screwed!

Saturday, March 12, 2005

Comment On FSA Procedures

Comment On FSA Procedures

The Financial Services Authority (FSA) has asked the City to comment on its review of enforcement procedures, specifically it has asked as to whether its regulatory decisions committee is the "right model" for making contentious decisions.

The committee's Chairman, Christopher Fitzgerald, was forced to resign following him being seen talking with a lawyer who was sitting on a panel hearing an appeal against one of its decisions.

The FSA has put out a series of questions about its enforcement process, but indicated that it will not ask for changes in the legislation that sets the terms under which it operates.

The FSA was forced to review its procedures, after the financial services markets tribunal ruled against its £1.1m fine on Legal & General for endowment mis-selling could not be justified.

Thursday, March 03, 2005

A Nice Little Earner

A Nice Little Earner

It is reported that Andy Hornby, head of the branch business of the banking group HBOS, is to receive shares worth £2.2m; after reaching targets to boost profits in the bank's Halifax and Bank of Scotland network.

The 38 year old former supermarket executive was offered the shares under a package designed to prevent him becoming chief executive of the troubled chemist chain Boots two years ago.

Thsi despite tha fact that profits have been hit by a £130m provision, to cover claims for endowment misselling.

How nice.

Sunday, February 27, 2005

Abbey's New Sales Drive

Abbey's New Sales Drive

It seems that Abbey is going to start pushing its savings products in a new sales drive.

It is reported that this sales drive will be launched despite the fact that Abbey has increased its provisions for mis-selling by £154M.

The new CEO, Francisco Gomez-Roldan, has stated that he will introduce a new incentive scheme and impose minimum sales targets on branch staff.

It seems that not everyone is happy with this new sales drive; Marianne Fitzjohn, a director of Endowment Justice, is reported to have said:

"Abbey has an appalling record for mis-selling and its handling of complaints has been equally shabby. I'm very concerned to see this heavy drive on sales..."

Abbey National was fined £1M by the Financial Services Authority in 2002, for mis-selling mortgage endowments to over 40000 customers. Then, for good measure, it was fined over £2M a year later for compliance failings.

Wednesday, February 23, 2005

Prudential's Little Ray of Sunshine

Prudential's Little Ray of Sunshine

Those of your with underperforming and useless endowment polices, will no doubt be dreading this year's round of letters from your life assurance companies; as they tell you, yet again, that they are cutting their bonuses on their pitifully pathetic products.

However, there is one small piece of good news for those of you with a Prudential with profits policy.

It is reported that bonuses paid to with-profits policy-holders will be the same or bigger than last year's.

Around 5.5M people hold a Prudential with-profits fund. Prudential said the fund had seen an "exceptionally strong" return of 13.4% gross over the past year, compared with the FTSE 100 index's total return of 11.25%. Over the past five years, the fund has seen a pre-tax return of 20.7%, while the FTSE 100 has seen a negative total return of 19.5%.

Prudential said that buoyant performance meant it would add £2.2bn to the value of its policies.

This means that Prudential will at least maintain the same level of bonus it paid last year across all with-profits policies. Additionally, its with-profits annuities total bonus was to be increased to 7.12% this year, up from 6.35% last year.

David Belsham, actuarial director at Prudential Assurance, said that the fund's good performance was down to "long-term prudence" quote:

"We are now seeing the benefit of long-term prudence. We took early action to protect policyholders' funds by switching out of equities ahead of the prolonged bear market and policyholders are now benefiting from the strong returns earned on Prudential's with-profits fund...This year's bonus declaration shows that with-profits continues to be an attractive investment for policyholders when provided by a financially strong and well managed fund, such as Prudential."

I have but two simple questions:

1 If the Pru can do this, why can't the other life assurance companies?

2 The implication of the Pru's prudence (forgive the pun), is that other life assurance companies have not been prudent. This surely means that they (the other life assurance companies that have cut bonuses) can be sued for mismanagement, doesn't it?

Tuesday, February 22, 2005

The Lottery of Claiming Compensation

The Lottery of Claiming Compensation

This is Money has an interesting article about the mixed fortunes of two people with identical endowment mortgages, taken out with Canada Life.

It seems that despite the similarity of their policies, when they tried to claim compensation for an expected shortfall, they were treated differently and offered different amounts of compensation.

As I have long suspected, since I began this site over two and a half years ago, the treatment that you get from the life assurance companies and their acolytes is a lottery.

Some win, the majority lose.

Monday, February 21, 2005

Sunday, February 13, 2005

The Long March

The Long March

Those of you with long memories, who have been following my attempts to try to secure redress for the mis-selling of my two underperforming useless endowment policies, may recall that I lodged a claim via professional complaint handlers way back on January 21 2004.

This claim was in respect of the endowment policy that was sold to me in 1987.

Well, over one year on, the claim handlers have written to me enclosing a "mortgage history/authority request".

Apparently my life assurance company requires that I sign this, before they gather information relevant to my case.

I think I will ask one very obvious question here, why the hell has it taken over a year just to get to this stage of the investigation?

This either means that the professional claims firm a re incompetent, or the life assurance company is being deliberately obstructive.

Wednesday, February 09, 2005

Terminal Decline

Terminal Decline

The Scotsman writes that endowment policies are in "terminal decline". They cite the recent cuts in bonuses, announced by the larger life assurance companies; quote:

"..Standard Life and Clerical Medical were this week the latest in a string of assurors to serve up unpalatable news to policyholders: the former slashed bonuses almost across the board, despite a 10.4 per cent pre-tax return on its with-profits fund, while the latter's investors fared little better, although its fund was up 9.9 per cent.

That followed grim tidings from Scottish Widows, a subsidiary of Lloyds TSB, and Aviva - owned Norwich Union. Like Standard Life, Widows cut final payouts for the sixth time in three years, following a 10.5 per cent lift in its fund.

Earlier, Norwich Union, the UK's largest insurer, became the first this year to deliver a stinging blow, slashing payouts by up to 11.5 per cent when its four funds overall enjoyed the same rise.

Prudential's bonus declaration is over a fortnight away, while Abbey National is not due to make its announcement until March. The Pru has claimed it will increase or maintain total bonus rates on all unitised with-profits and offer good year-on-year increases in value

The bottom line to this is that we, the holders of these lousy underperforming polices, are screwed.

Monday, February 07, 2005

The Ombudsman

The Ombudsman

The Financial Ombudsman Service (FOS) wrote to me today, about my request for their assistance in extracting details from my life assurance provider of commission payments made on my two endowment policies.

The FOS say that they cannot help as my life assurance company, under the terms of the commission disclosure rules, is not obliged to provide me with that information.

This is very odd; it is my policy and my money, yet I am not allowed to know what they do with it!

Given the response of the FOS, I am more than a little surprised that they made me fill in a form with precisely the same details as those contained in my original request to them; when they could have told me that they couldn't help me at the outset.

Thursday, February 03, 2005

Standard Life Cuts Bonus

Standard Life Cuts Bonus

In more bad news for holders of failing endowment policies, Standard Life has yet again cut bonuses; for good measure it also warned that lower payouts will continue, irrespective of the recovery in equity markets.

Standard Life has around 2.6m with profits endowment policy holders.

The cuts are the 6th in 3 years; you will recall that Standard Life "welched" on its mortgage endowment promise a few months ago, I assume its 2.6m policy holders must be feeling pretty sick by now.

The effect of this latest round of cuts can be seen in this example:

A £50 per month mortgage endowment over 25 years was worth £55K, until the latest cut; now it is worth just £49K.

I wonder of the directors of Standard Life have had their bonuses cut for good measure?

Sunday, January 30, 2005

New Rules

New Rules

The Financial Services Authority (FSA), has issued final rules and guidance to help ensure that with profits policyholders are treated fairly.

The rules are intended to increase the transparency, and accountability, of the life assurance industry. The rules cover ao:
  • The costs charged to a with profits fund, by the firm managing the fund

  • Penalties levied on policyholders, who surrender their policies early

  • The need for funds to be managed, to ensure maturity payouts fall within a target range set for the fund

  • The requirement that information be presented to policyholders, or potential policyholders, in a format they can more readily understand

  • Firms must provide information to with profits policyholders within 28 working days of a decision to close a fund to new business

  • A policyholder advocate will be appointed to protect the interests of policyholders
The rules will come into effect on June 30th.

Mick McAteer, principal policy advisor at Which?, believes that these rules represent a retrograde step; he argues that they put even more power, and discretion, into the hands of directors.

He goes on to point out that directors will be able to carry on protecting shareholder interests, by using with profits funds as a slush fund to pay compensation costs.


"With profits policies which are still one of the riskiest products people can invest in. The FSA has done nothing meaningful to ensure that firms spell this out. Neither have they provided the necessary checks and balances to ensure that directing minds in the sector put consumers' interests on the same level as shareholders..".

Friday, January 28, 2005

Form Filling

Form Filling

I finally got "off my backside", and filled the form that I received from the Financial Ombudsman Service the other day.

This form relates to my complaint against my life assurance company, for not providing me with details of commission payments made on my two endowment policies as requested back in November.

The wheels of justice turn slowly!

Thursday, January 27, 2005



The Financial Services Authority (FSA) is reported to be conducting an internal review of its investigations and enforcement operations, after the financial services and markets tribunal overturned its £1.1M fine on Legal & General (L&G) for endowment mis-selling.

The FSA is expected to appoint one of its top officials to lead the review.

Monday, January 24, 2005

The Dead Hand of Bureaucracy

The Dead Hand of Bureaucracy

The Financial Ombudsman Service (FOS) wrote to me today, in respect of my complaint against my life assurance provider not answering my query about commission payments on my two endowment policies.

The FOS will deal with my complaint; however, they need me to fill in a form.

Needless to say, the form requires me to regurgitate details that were already included within my original letter sent to the FOS.

The ways of the bureaucrat are indeed mysterious to behold!

No matter, a small delay of a week, is nothing in comparison to the 2.5 years I have spent on trying to claim redress.

Saturday, January 22, 2005

Tick Tock

Tick Tock

Time is running out for the hapless holders of underperforming, and useless, endowment mortgages to complain over mis-selling.

The life assurance companies will be writing to their policy holders in the coming months, warning them that they have a limited length of time left to complain.

After that, tough luck!

It is reported that Standard Life and Lloyds TSB will shortly be starting their mail shot about this issue.

Norwich Union, will be writing to its 1.1m endowment policy holders in March, reversing its earlier commitment not to impose a time bar.

How nice of them!

Friends Provident and Zurich will also be writing to their policy holders.

Some will allow 6 months to complain, others 12.

The Financial Services Authority (FSA) rules give policyholders three years to complain, after the arrival of an initial letter warning that an endowment has underperformed.

Out of the large firms, only Legal & General and Prudential have not imposed time limits on complaints.

Friday, January 21, 2005

L&G Puts The Boot In

L&G Puts The Boot In

It is reported that David Prosser, CEO of Legal & General (L&G), has demanded changes to the Financial Services Authority's (FSA) disciplinary procedures.

This is in the wake of the partly successful appeal by L&G, against the FSA fine of £1.1M for endowment policy mis-selling by L&G.

Prosser asked for greater independence in the FSA's regulatory decisions committee (RDC), that is the body that considers recommendations made by the regulator's enforcement staff.

Currently the chair of the RDC is an FSA employee.

It is reported that L&G may ask the Financial Services and Markets Tribunal to enforce these changes.

Wednesday, January 19, 2005

Norwich Union Cuts Payouts

Norwich Union Cuts Payouts

Norwich Union gave 1M holders of its with profits endowment policies a kick in the teeth yesterday.

It announced that it would be cutting payouts on maturing, longer term, policies by up to 11%.

The cuts are in spite of an investment return of over 11% before tax in 2004.

Norwich Union did at least try to ease the pain, by announcing that it has put aside £1BN to help its policy holders stuck with an underperforming endowment policy.

Mike Urmston, the chief actuary at Norwich Union Life, is reported to have said:

"The last two years of positive returns have not compensated for the negative returns of the previous three years."

Norwich noted that its maturing 25 year mortgage endowments are producing surpluses, over and above the target amounts. However, its 15 year mortgage endowments are falling short.

The company has reduced its exit penalties, that are charged when people cash in their policies early or move their money to other insurers, to a rather high 18%.

Score Draw

Score Draw

The Financial Services and Markets Tribunal (FSMT) issued its judgement in the Legal & General (L&G) vs Financial Services Authority (FSA) case.

The FSMT yesterday cleared L&G of wide-spread mis-selling of endowments, it noted that only 8 out of the 152 sales reviewed could be proven to be mis-sold.

The Tribunal also noted that the £1.1m fine imposed by the FSA should be reduced, and said a further hearing will be held on this issue.

It noted that ruled that the FSA had been "in error in its approach to the mis-selling case", adding that its conclusions were "not justified by the material before it".

The case has ended up costing L&G more in legal fees, than it will save through a lowering of its fine.

Needless to say both L&G and the FSA are claiming victory.

Whether this ruling helps the 8 million hapless holders of these underperforming, and useless, products remains to be seen.

Tuesday, January 18, 2005

Judgement Day

Judgement Day

Today is judgement day in the battle between the Financial Services Authority (FSA) and Legal and General (L&G).

The Financial Services and Markets Tribunal will rule in the appeal made by L&G, over the FSA's fine of £1.1M for mis-selling endowment mortgages.

Smart money in the City is on the tribunal giving the FSA a "drubbing" over it's role in this case, and in the manner in which it decided on the fine.

A partial victory for L&G would severely damage the FSA, and open the gates for others to appeal their fines.

Monday, January 17, 2005

Backlog Developing

Backlog Developing

It seems that there is quite a backlog of endowment mis-selling cases piling up, at the Financial Ombudsman Service (FOS).

These cases are now likely to take a year or more to resolve. The FOS had budgeted for around 35000 cases, but now believes that it will be dealing with 67000.

The FOS has hired 200 new adjudicators in 2004, but that does not seem to be enough to cope with the increased number of complaints from people holding useless and underperforming endowment policies.

The FOS is pretty "pissed off" with the endowment providers, and believes that they are not co-operating with the FOS adjudicators.

It seems that there are 10 well known trouble making life assurance companies, who simply reject consumer complaints out of hand. These rejected complaints then land on the desk of the FOS.

It seems that these 10 naughty companies don't even bother to investigate the complaints, but are happy to let the poor consumer wait in limbo for 8 weeks (the FSA time limit) before telling them that their complaint is rejected.

Nice trick guys!

I am pleased to note that the names of these 10 companies have been passed on to the FSA, for fines.

It would be even better, if the names were released to the media; thus "naming and shaming" these companies as well.

Waste Not Want Not

Waste Not Want Not

It is not the place of this site to lecture people on what they should do with their endowment compensation, if they are lucky enough to receive some.

However, I must admit to being more than a little concerned to read that some people; instead of using the compensation to reduce their outstanding mortgages, are in fact "blowing it" on holidays and consumer items.

The full story is in the Sunday Herald.

This is, in my humble view, a very stupid thing to be doing.

Wednesday, January 12, 2005

Halifax Tardy

Halifax Tardy

It is reported that Halifax is being somewhat tardy with paying compensation to its endowment policy holders.

Complaints handler, Brunel Franklin, accused Halifax of delaying payments up to 6 months.

Claims director for Brunel Franklin, Ian Allison, is reported to have said:

"We have supplied Halifax with all the information they need to settle these claims quickly, yet they are still refusing to pay out monies that they have admitted is due to clients....This is an outrageous state of affairs and one that people need to know about..."

Halifax say that all cases were handled within the guidelines laid down by the Financial Services Authority.

Halifax spokesman Mark Hemingway is reported to have said:

"We aim to clear compensation cases as quickly as possible, but often we are reliant on calculations coming back from third parties, such as life companies, so this can take time...Among banks and insurers, we are not unusual in the time we take over payment of claims..".

In other words, whoever you are claiming against, you are going to have to wait a long time.

Tuesday, January 11, 2005

Complaint Raised With Ombudsman

Complaint Raised With Ombudsman

Copy of a letter sent to the Financial Ombudsman Service today:

"Dear Sir/Madam,

I wish to make a formal complaint about ***’s handling of my request for information about commission payments, on my two endowment policies.

I originally made the request for information on 11 November 2004 and, despite several letters and a phone call, I have yet to receive an answer.

I regard their handling of this matter to be unhelpful and obstructive.

I have enclosed copies of the correspondence, and a summary of the phone call.

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

Thank you in advance for your help

Monday, January 10, 2005

Bonuses Cut

Bonuses Cut

More bad news for the hapless holders of underperforming, and useless, endowment policies.

Axa Equity & Law has announced that it will be halving the annual bonus payments on its with-profits policies from a pathetic 2%, to a derisory 1%.

That is less than inflation, and certainly less than you would get for leaving your money in a savings account.

Legal & General (L&G) has cut interim bonuses on some of its with-profits bonds from 3.5% to 2.75%.

Prudential is maintaining its annual bonus payouts on its Prudence Bond, at 3.25%.

The Actuarial Profession are reported to have said that, despite rising equity markets, bonus payouts "are continuing to fall and are set to do so for a number of years yet".

Sunday, January 09, 2005

Three Cheers for Liverpool Victoria

Three Cheers for Liverpool Victoria

Liverpool Victoria, the UK's largest friendly society, announced this week that all of its currently maturing mortgage endowment policies would receive a surplus on top of the mortgage amount covered.

In other words, those who hold endowment polices with Liverpool Victoria will receive a small profit over and above the mortgage.

Malcolm Berryman, Liverpool Victoria's group chief executive, said:

"The strong performance of our with-profits fund has ensured a surplus for all of our mortgage endowment policies that have matured or are currently maturing..In addition, our unconditional guarantee gives total peace of mind to our members for the future...."

Liverpool Victoria confirmed that none of its 6,000 mortgage endowment policyholders will suffer a shortfall, whatever happens to future investment returns.

It has made a financial provision to cover this guarantee, this will not have any adverse impact on future financial performance.

Now let us compare this excellent piece of news, with the dismal announcements made by the life assurance industry recently.
  • AXA has announced that it will be reducing their payouts

  • Standard Life will reduce its payouts to its 2.4M policy holders

  • The Actuarial Profession, the body which represents those who run with-profits funds, has warned that the majority of customers will face falls in value of their policies for several years to come
Now it is not unreasonable to ask, how is it that one company can actually generate a profit for its policy holders; whilst the others only seem to be able to generate losses for their hapless endowment policy holders?

After all, they have all faced the same declining stock market!

The answer lies in the manner in which the companies manage their funds. Liverpool Victoria were more cautious when it came to paying out vast annual bonuses, in years of high returns.

They understood the concept of "with profits", namely that the profits made in one year should be used to smooth returns in the years of poor performance.

Unfortunately, it seems that many other "big names" in the "profession" chose to go for big bonuses in order to attract customers.

Needless to say, famine follows feast; when the stock markets started to fall, and with it investment returns, these companies that had paid out super inflated bonuses had nothing left in the cupboard to smooth things over with in the lean years.

I would argue that, in addition to persuing these companies for "mis-selling" polices, people, the FSA and the Treasury Select Committee should be going after them for mismanaging the funds.

After all if one company can produce a surplus whilst operating in the exactly the same market, why couldn't the others?

Procter Jumps Ship

Procter Jumps Ship

Andrew Procter, head of enforcement at the Financial Services Authority (FSA), is leaving to join Deutsche Bank; as head of compliance for Britain and Western Europe.

Procter was involved in the investigation into endowment mis-selling at Legal & General (L&G), which is currently appealing the £1.1m fine at the financial services and markets tribunal.

The result of their appeal is expected to be announced this week; and it was assumed, by some, that if L&G won then Procter would have to resign.

Wednesday, January 05, 2005

A Straw in The Wind

A Straw in The Wind

The Financial Services authority (FSA) has decided that it is now time to "get tough" with the life assurance industry, in respect of the underperforming and useless endowment policies that some 8 million people hold in the UK.

The FSA have written to the chief executives of all companies that sell endowment policies; the letter warns them that, in the opinion of the FSA, they (the life assurance companies) are dismissing complaints from customers without proper investigation.

To date, 500,000 people have complained to insurers and banks; and have received compensation for endowment mortgage mis-selling.

The FSA notes that the Financial Ombudsman Service (FOS) is upholding a large proportion of complaints, that were originally dismissed by the companies that sold the policies; this gives rise to the conclusion that the life assurance companies are not handling the complaints properly.

The FOS now employs 1000 people to handle endowment complaints.

Clive Briault, managing director of retail markets at the FSA, says:

"firms may not be handling complaints properly...Firms should not manage their own caseloads by allowing an excessive number of complaints to flow through to the FOS...".

The FSA has also identified "inconsistencies" in the decisions of some life assurance companies, relating to certain types of complaint.

To date the FSA has fined two companies, for their failure to handle complaints about endowment mortgages properly.

-Allied Dunbar Assurance was fined £725K for serious flaws in March 2004

-Friends Provident was fined £675K for failures in its procedures.

The FSA states that it wants firms to review their policies and procedures for the handling of complaints, and confirm that they are appropriate or take any necessary action.

The FSA will continue to monitor progress and outcomes to assure itself and the public that complaints are being handled fairly, and to act in any cases where it finds weaknesses that put consumers' interests at risk.

There is reportedly a straw in the wind, albeit a rather small one, that indicates that the mood at FSA headquarters is shifting in favour of the hapless endowment policy holder. Namely, that the majority of policies were not mis-bought but mis-sold.

Which? goes one better.

Which? wants the FSA to order a wholesale re-investigation of all rejected complaints, to ensure that people have been dealt with fairly.

Louise Hanson, head of campaigns at Which?, said:

"The FSA must continue to take these bad apples to task by immediately naming and shaming them, and then implementing significant fines where rules have been broken.."

This site fully endorses this suggestion.

Tuesday, January 04, 2005

Judgement Day

Judgement Day

The long awaited judgement, in the case of the FSA vs Legal and General (L&G) will be announced around the 10th of January.

The Financial Services and Markets Tribunal said that the delay in announcing their judgement, was due to sickness and holidays.

L&G went to the tribunal in 2004, in the hope of overturning the £1.1M fine imposed on it by the FSA for endowment mis-selling.

The FSA claimed that there were "fundamental deficiencies" in the way that L&G sold mortgage endowments to low-risk customers, between 1997 and 1999; specifically, their sales and compliance procedures were found to be wanting.

It is reported that customers were given unsuitable recommendations by sales people.

An internal memo at L&G admitted, that the policies had "a very real risk of shortfall at maturity". The FSA also detailed how L&G had failed its own mock regulatory inspections.

The 5 week hearing ended in October, the FSA and insurance industry having been holding their breath ever since.

Should L&G win the case, then the credibility of the FSA would take a severe "hammering". It would also act as the green light for other insurance companies to challenge decisions, and fines imposed upon them by the FSA.

However, should the FSA win it would provide a boost for its reputation and provide a firm underpinning of John Tiner's position as CEO. Whereas the CEO of L&G, David Prosser, may well have to resign.

We, the hapless holders of these underperforming and useless endowment policies, wait with baited breath.