The Endowment Diary

The Endowment Diary


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

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?