The Endowment Diary

The Endowment Diary


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

Tuesday, December 12, 2006

Extra Compensation Won

Extra Compensation Won

The Financial Services Authority (FSA) claims that due to its pressure, life assurance companies and others involved in the most notorious financial scandal in recent British history, have been forced to pay compensation to over 100,000 customers whose endowment mis-selling complaints had previously been rejected.

The FSA claims that due to its pressure, 75% of the rejected claims have so far been decided in favour of the customers.

This represents around an extra £120m in compensation.

Vernon Everitt from the FSA gave warning to the financial services industry that the FSA would be keeping a very close eye on how the firms were operating.


"It is encouraging that firms have improved the speed and quality of how they handle complaints.

News of a potential shortfall is a major worry for consumers and firms owe it to them to deal with their complaints quickly and fairly.

They need to pay particular attention to helping people deal with shortfalls when policies mature

Around 1.8 million people have received compensation for mis-sold underperforming useless endowment products, totalling £2.7BN.

The FSA should be wary of indulging in too much self congratulations. Millions of people are still facing a shortfall on their endowment policy, with little idea of how they are going to cover their mortgage debt.

The life assurance industry could put a stop to this chaos now, by agreeing to underwrite these useless underperforming products. Instead they are more than happy to pass the buck to others.

Thursday, December 07, 2006



Research carried out by the Financial Services Consumer Panel indicates that consumers are using mortgage endowment claims companies to save time, and help them through what they see as a complex process.

The research also claims that around 66% of successful claimants believe that they have received value for money from mortgage endowment claims firms. Given that the claim firms usually charge between 20%-30% of the compensation recovered, for work that the claimant usually do himself, this "value for money" seems to be a somewhat misguided belief.

Even more bizarrely, 25% of those who were unsuccessful said that they would definitely recommend the services of a mortgage endowment claims firm.

Given the alarmingly naivety of the respondents, it is hardly surprising that the financial services industry make such "hansom" profits out of the British public year in year out.

John Howard, chairman of the Financial Services Consumer Panel said:

"Some consumers seem quite prepared to pay part of their compensation to a claims firm, especially when the alternative is to receive no compensation at all, because they do not have the time or the confidence to pursue a claim themselves.

It is not clear the claim firms save consumers that much time and there was dissatisfaction with some aspects of the service provided by some firms; not giving details about the fees up front, and poor service in telling clients when the claim was not successful. This needs to be considered as the government starts to regulate this arena through the Department of Constitutional Affairs

Quite why this is a DCA matter is beyond me, as it clearly comes under the FSA's and Treasury's remit.

Saturday, December 02, 2006

Legal Loophole Helps Scots

Legal Loophole Helps Scots

An estimated 100,000 Scots homeowners, who missed the deadline for lodging endowment mis-selling claims, may still be eligible for compensation.

That at least is the view of Gerry Diamond, of the Endowment Compensation Centre, who has discovered a possible legal loophole which may help those who bought policies from Scottish providers including; Standard Life, Scottish Widows and Scottish Amicable.

Mr Diamond believes that the tree year time limit imposed by the Financial services Authority (FSA) is illegal in Scotland, because Scots law allows five years to challenge unfair contracts.


"This means that people should have two more years to claim than the three-year FSA rule that is currently applied by many sellers of endowment policies."

It is estimated that over 400,000 Scots have been mis-sold endowment policies.

As I keep saying, all of this trouble could be stopped here and now if the life assurance companies "stepped up to the plate" and underwrote these useless underperforming products.

Monday, November 20, 2006

Compensation Payments Stalled

Compensation Payments Stalled

It seems that, according to endowment claims company Brunel Franklin, consumers who were mis-sold underperforming and useless endowment policies are being kept waiting weeks/months for their compensation cheques to arrive.


Seemingly the financial institutions are struggling to cope with a flood of complaints, and some are stalling payouts to successful claimants.

Ian Allison, claims director for Brunel Franklin, said:

"It is wholly unreasonable to wait two months or more for your compensation payout when the figures have already been agreed and the offer accepted by the client. At this point there is no reason why the claim can't be settled within a few days."

It is hardly surprising that the financial services industry in Britain has such a lousy reputation, and that the ordinary man in the street no longer has any trust in it.

It is also worth noting that many in the financial services industry in the City will enjoy massive six figure bonuses this year end. Maybe they would like to use some of their windfalls to help out those who will be suffering shortfalls on their endowment polices?

Yes, that will happen!

Monday, November 13, 2006

The Endowment Mortgage Crisis

The Endowment Mortgage Crisis

It is not with any exaggeration that the mis-selling of mortgage endowment policies is being described by many as the worst financial scandal in Britain of the last 30 years.

However, quite disgustingly the life assurance industry has done its best to wipe it hands of the matter; by trying to apportion blame on those who took out these useless underperforming products.

It is estimated that around 2.2 million people are facing shortfalls averaging £7,000.

The average payout on a £50 monthly 25-year policy has halved from £98,000 in 1992 to just £48,000 today.

Companies guilty of mis-selling have already paid out 2.3BN in compensation to over 1.5 million people.

The House of Commons Treasury Select Committee conducted an investigation into mortgage endowment mis-selling and issued a damning indictment of the industry.

The Chairman, John McFall, said:

"The effects of mortgage endowment mis-selling will be felt for at least another 10 years as these policies fall due for repayment.

It is absolutely vital that homebuyers who were mis-sold lodge a claim for compensation before the time bars come down.

Otherwise they will have even greater difficulty coping with payment shortfalls.

The lesson for the financial services industry is to be always simple and straightforward in its future dealings with the public.

I hope that going forward they have learned from this cathartic experience

The lesson has clearly not been learned, as the life assurance industry is refusing to do the one thing that would restore people's faith in it, and eliminate the crisis that is causing misery to millions, namely underwrite these useless products.

Tuesday, November 07, 2006

Another Scandal In The Making

Another Scandal In The Making

The FT reports that first-time buyers and others are taking out interest-only mortgages, with no identified means of capital repayment.

This leaves them dangerously exposed to financial calamity, or being forced to trade down the property ladder to pay off their mortgage.

The increase in interest-only home loans has led to fears of another endowment style mis-selling scandal.

The Financial Services Authority (FSA) has noted that interest-only mortgages are one of the top "emerging retail risks" and drew attention to "an increasing number of mortgages.. with the lender not recording that there was a linked repayment vehicle in place".

People are in danger of mortgaging their future, without any hope of paying off the debt. A very foolish thing to do.

Thursday, October 19, 2006

Endowment Misery Continues

Endowment Misery Continues

Quite unbelievably, even though endowment mortgages have been shown to be the worst fanancial product ever foisted on the unsuspecting British public in living memory, around 40,000 of these useless underperforming products were sold in the first six months of this year. Even worse, around 100,000 were sold last year.

It beggars belief that, despite the lousy performance and negative publicity surrounding these useless products, people are still prepare to fall for the salesman's patter.

It also beggars belief that life assurance companies have the balls to continue to sell them. Clearly money and profits come before reputation and integrity.

A smooth talking salesman can earn a commission equivalent to the first 18 months' premiums, just for selling the policy. He can then continue to get paid annual commission, as long as the hapless endowment owner continues to keep the plan going.

It is little wonder that many people in Britain have lost confidence in the life assurance industry, and the financial services sector as a whole.

Monday, October 16, 2006

Secret Payments

Secret Payments

It appears that some major financial institutions, that sold the hapless British home owners their useless and underperforming endowment policies, are conducting a secret "payoff" exercise.

Fearful that their already tarnished reputations will be further dragged through the muck and mire, some of Britain's leading financial institutions are paying off endowment holders, so as to avoid fines from the FSA and further reputational damage.

Included on the list of shame are; Barclays, Halifax, Friends Provident and Legal & General. They are reportedly secretly contacting customers, and offering to "review" the way business has been handled.

Pretty pathetic isn't it?

Hardly surprising that people long ago lost faith in the financial services industry in Britain.

Tuesday, October 10, 2006

The Dangers of Interest Only Mortgages

The Dangers of Interest Only Mortgages

As if the endowment selling scandal was not enough for the British housing market and financial system to bear, it seems that we may be heading for another mi-selling scandal of equal proportions.

The FT has published a good article covering the concerns about the latest financial product to be foisted on the unwary first time home buyes, namely interest only mortgages.


"First time buyers and cash strapped home owners are scrambling to take out interest only mortgages that could leave them facing financial ruin or forced to trade down the property ladder to pay off their mortgage.

Mortgage lenders' willingness to market interest only home loans has prompted fears that these mortgages could be the cause of the next misselling scandal

Read the full article here FT.

Monday, October 02, 2006

Financial Ombudsman Service Under Pressure

Financial Ombudsman Service Under Pressure

The Financial Ombudsman Service (FOS) is under sever pressure, as it struggles to cope with the 250 endowment complaints that it receives every day.

In theory, according to the FOS, it will deliver a decision on an endowment case within a mind numbingly slow nine months, though complex cases and appealed decisions take longer.

The FOS also claims that an appeal on an FOS decision, should be reviewed in between six to 12 months.

The FOS have recruited 120 more adjudicators and support staff, they now employ 400 people to work on endowment complaints.

As I keep repeating, this whole situation is ridiculous; it could be solved at the stroke of a pen, if the life assurance companies agreed to underwrite these useless underperforming endowment policies.

Friday, September 29, 2006

Negligence Claims Rise

Negligence Claims Rise

A survey carried out by Alexander Forbes International, notes that claims and notifications against professionals rose sharply, climbing to 603 in 2005-06, from 452 a year earlier.

The largest factor in that rise can be accounted for by claims for incorrect endowment advice, which rose to 20% from 12%.

Executive director Mark Bracher said:

"An increasing number of home owners are finding that their endowment policies will fail to pay off their mortgages and they are seeking recompense from their accountants for negligent advice.

This has been compounded by a number of specialised claims farmers who have made a business of encouraging home owners to seek compensation from their advisers

This problem would be solved at the stroke of a pen, if the life assurance companies agreed to underwrite these useless underperforming products.

Thursday, September 14, 2006

Nationwide and Portman To Merge

Nationwide and Portman To Merge

Nationwide and Portman building societies announced on Tuesday that they plan to merge. They claim that they intend to provide a "compelling alternative to the big retail banks".

Portman members will receive a booklet explaining the planned merger, before the building society's Spring 2007 AGM. They will be asked to vote on the proposals. Nationwide members do not have anything to do.

If the vote goes in favour of the merger, it is planned to be finalised by September 2007.

Qualifying members of Portman will receive a pre-tax windfall worth a minimum £200, if the merger goes ahead. Only members who had a minimum of £100 in savings, or a balance of £100 on a mortgage, at the close of business on 11 September will qualify.

Nationwide members will not receive a windfall.

Tuesday, September 12, 2006

Gherkin To Gobble Up Pru

Gherkin To Gobble Up Pru

It is reported that Swiss Re, the Swiss financial group known for the Gherkin in London, is to buy a large part of the UK operations of Prudential for around £5BN.

Swiss Re is reported to have offered to buy the closed life fund business of Prudential. The closed funds contain existing insurance policies, but no longer have new policies added to them.

The approach was made last month on the heals of Mark Tucker's, the CEO of Prudential, plans to shake up the Pru's underperforming UK operations.

Prudential's UK closed life book includes with profits policies and endowment mortgages. The value is estimated to be around £5BN.

The approach has raised questions about the Pru's commitment to Britain. There are rumours that some investors are keen for Tucker to scale back in Britain and concentrate on the faster growing business in Asia and the US.

The sale would give the Prudential £1.5BN. The value of with profits policies is split between shareholders and policyholders. Under the sale of a with profits business, shareholders receive a lump sum to account for the future profits they would have received from the policies.

Swiss Re has bought a series of closed life funds in America, and in Britain it bought Life Assurance Holding Corporation.

Nice to see that someone can make money out of the useless and underperforming endowment policies that were foisted on the unwary British public in the 1980's.

Wednesday, September 06, 2006

Friends Provident In The Wrong

Friends Provident In The Wrong

In a rare piece of good news, it seems that the thousands of endowment policy holders who have been told that they have run out of time to complain about their useless and underperforming mortgage endowment policies have been offered some hope of compensation.

The Financial Ombudsman Service (FOS) has ruled that Friends Provident was wrong to impose a time limit on an endowment misselling complaint bought by a Mr and Mrs Smith, and has ordered the insurer to reopen their case.

The Smiths are physically disabled, and that has impacted the decisions of the FOS. However, endowment claims and legal specialists reportedly believe that this judgement could impact on all policyholders who have been time barred.

Tim Moore, of, said:

"This ruling suggests that if policyholders can prove that they were too confused, for whatever reason, to make accurate financial choices that the time bar may be invalid."

Under FSA rules, endowment policyholders who want to complain must do so within three years of receiving a "red" warning letter.

The FOS ruled that the Smiths were too confused to make an accurate decision about their mortgage options, as such the time bar was invalid.

The ombudsman is quoted as saying:

"I take the fact that Mr and Mrs Smith are unable to work as a good indication they may find coping with day to day normal life a challenge, and consider their circumstances are exceptional for the purposes of the mortgage endowment time bar rules."

A "coalition" of endowment claims experts including; Donns Solicitors,, CPH Financial Advisory Services, Whitehall Randall, and Michael Booth QC is reportedly ready to test whether it can be applied to all policyholders, not just the disabled.

Andrew Hummersone, from Whitehall Randall, said:

"In light of this ruling, our next step will be to send another 10 time barred cases to the FOS.

The minute a claim is rejected we will immediately seek a High Court review, with the aim of confirming once and for all whether time bars have any validity

As ever with the endowment scandal, the lawyers and claim firms will do very well out of it.

However, as I keep repeating, the best way for all of the parties involved in this disgrace would be for the life assurance companies to do the decent thing and bite the bullet of underwriting these useless underperforming policies.

Thursday, August 24, 2006

Berkeley Independent Advisers Network in Default

Berkeley Independent Advisers Network in Default

The Financial Services Compensation Scheme (FSCS) has declared Berkeley Independent Advisers (BIA) network in default, five months after Tenet acquired it for £700K.

The FSCS said that the decision had been made after receiving 300 claims for compensation from individuals, and after being advised by administrators PricewaterhouseCoopers that it did not have sufficient assets to meet the cost of redress.

Consumers will now be able to receive compensation for alleged poor advice from BIA's advisers in relation to endowment mortgages, investment bonds and personal pensions.

All other regulated financial services firms, including other advisers, will cover the bill for compensating former BIA clients through their annual levy to the FSCS.

Questions are being raised as to the speed with which BIA has been declared in default.

As repeated time and time again on this site, if the life assurance companies just agreed to underwrite their useless underperforming endowment policies much of this pain and extra cost could be avoided.

Failing that people, and the life assurance industry, are going to be saddled with this problem for years to come.

Tuesday, August 22, 2006

2006 Statistics

2006 Statistics

According to the 2005/06 annual review from the Financial Ombudsman Service (FOS), mortgage endowment complaints have fallen very slightly. However, insurance-related disputes are on the increase.

The total number of new cases considered by the Ombudsman in the year ending 31 March 2006 across all financial products increased to 112,923 from 110,963.

New mortgage endowment cases, which accounted for 61% of the total, dropped very slightly from 69,737 at 31 March 2005 to 69,149 a year later. This is the first time the FOS has recorded a decrease in complaints about these useless products since 2003/04.

Hardly a dramatic fall though, and indicative of the sorry regard with which the British public hold the life assurance industry.

Monday, August 14, 2006

Shabby Abbey

Shabby Abbey

Abbey is reportedly still struggling to address and satisfy its endowments problems, some 15 months after Abbey was fined £800K by the Financial Services Authority (FSA) for its poor performance in handling endowment mortgage mis-selling complaints.

According to reports, endowment complaints companies say that paperwork frequently goes missing at Abbey and that their clients are waiting months for a decision from Abbey about their cases.

Keypoint Endowment Claims allege that it has 500 Abbey clients who have all been waiting over 8 weeks for a decision from Abbey. In fact the majority have waited over 3 months.

The FSA rules stipulate that endowment providers must decide whether to uphold or reject a mis-selling complaint within 8 weeks. In the event that they cannot stick to this deadline, they must send a holding letter to complainants. Failure to do this is a breach of the FSA rules, and risks disciplinary action.

John Gardiner, operations director at Keypoint, is quoted as saying:

"Abbey is by far the slowest, most disorganised and inflexible endowment company we deal with.

In more than half of the 500 outstanding cases I have with Abbey, the bank hasn't even sent a holding letter

Abbey is owned by Banco Santander, and was fined £800K last year and ordered to reopen 50,000 mis-selling cases that it had previously rejected.

I repeat, much of this pain and mess could all be stopped if the life assurance companies bit the bullet and underwrote these useless products that we have been lumbered with.

Monday, July 31, 2006

Endowment Claims Double

Endowment Claims Double

The Financial Services Authority (FSA) has doubled its estimate of how much firms have paid out in compensation for mis-selling endowment mortgages in the past, up to £2.2BN.

The FSA said the estimate is up to April 1, 2006.

The previous estimate of £1.1BN was up to the end of 2004.

Compensation payments have jumped sharply, £945M was paid in the year to April 1 with the number of complaints rising to 767,152.

In the year to April 1, 2005, compensation was £601M for 324,935 complaints. In 2003/04 compensation was £424M for 202,200 complaints, and before April 2003 compensation totalled £225M for 250,000 complaints.

Bradford & Bingley on Thursday announced its compensation provision would rise to £165M.

All of this pain could be avoided if the life assurance companies bit the bullet between their teeth, and agreed to underwrite these useless policies.

Thursday, July 27, 2006

Bradford and Bingley Hit By Claims

Bradford and Bingley Hit By Claims

Bradford & Bingley PLC today announced a larger than expected hit from endowment compensation claims by annoyed endowment customers.

Bradford & Bingley said that it was setting aside a further £89.4M, to cover the higher-than-expected number of complaints from customers who claim they were mis-sold endowment policies.

The total provisions now stand at £165.2M.

Bradford & Bingley CEO Steven Crawshaw said that he could not rule out further provisions in future.


"It'd be a very brave person who would say that this is the last, but there are signs of light at the end of the tunnel."

Analysts at Keefe, Bruyette & Woods wrote in a note:

"The compensation claims for mis-selling are massive in relation to expectations and historical experience. While this should be a one-off, it is a negative for sentiment."

Bradford & Bingley also said underlying pretax profit, which excludes the endowment provision, came in at £164.2M in the six months to June 30, up 9% from £150M in the same period last year. Analysts had been expecting profit of £162.4M.

In my view a lot of heartache for those who bought these useless policies, and those who "manage" them, could have been saved if the life assurance companies simply underwrote them.

Tuesday, July 18, 2006

Claims Firm Collapses

Claims Firm Collapses

As if things were not already bad enough for the millions of people stuck with underperforming and useless endowment policies, 6000 now face the added burden of having paid money to a claims firm that has been wound up by the DTI.

6000 people whose endowments failed paid £495 upfront to a claims company, Manchester-based Vickers Anderson Consulting.

It is unclear as to whether they will be able to get their money back.

What a mess!

Wednesday, July 05, 2006

250 A Day Habit

250 A Day Habit

The Financial Services Ombudsman (FSO) announced that it received 250 complaints a day last year about endowment mortgages.

Walter Merricks, the chief ombudsman, said that there were indications that the "extraordinary high volume" of complaints about endowment mortgages was levelling off.

Saturday, July 01, 2006

Words of Wisdom

Words of Wisdom

There are some words of wisdom in the FT for holders of Standard Life with profits policies.

Thursday, June 29, 2006

A Nice Little Earner

A Nice Little Earner

Those of you who were worried that the poor old executives of Standard Life might not do so well out of their forthcoming share listing, need not worry.

As already reported on this site, the share listing has been badly affected by the downturn in the stock market; it meant that Standard Life are having to offer their shares at a lower than expected price.

Needless to say, this negatively impacts policyholders who are to receive an allocation of shares; their share allocation is now lower in value than they had been expecting.

It should be remembered that it is not only policyholders who receive shares, but the board of Standard Life as well. Therefore they too will receive a lower valuation of their allocation.

Now as with many things in life, not everything is as clear cut as it first may seem. You see, some of the board have a nice agreement whereby if the share price is lower than first expected they get allocated more shares.

Standard Life's top five executives will be awarded more shares if the issue is priced cheaply.

It seems that the agreement has put management's interests alongside the institutions, which will be pressing for a low issue price, rather than retail investors that want to sell their shares immediately to get their windfalls.

Sandy Crombie, the chief executive, was awarded a maximum incentive of £1.13M. He is the man who opposed the demutualisation of Standard Life in 2000, when policyholders could have earned 10 times as much as they are now had the deal gone ahead.

Funny old world isn't it?

Wednesday, June 28, 2006

FSA Apologises For Failures

FSA Apologises For Failures

The chairman of the Financial Services Authority (FSA), Callum McCarthy, has apologised over its heavy handed approach to regulation.

McCarthy said that he accepted that the FSA had been dogged by "failures", but claimed it had now made reforms.


"The review of the FSA's enforcement procedures we completed last year shows that when we recognise failures in our processes we will seek to remedy them.

I regret that it took us so long to recognise the legitimacy of concerns expressed to us that these processes were not fair to those subject to them

The apology comes in the wake of the fiasco with Legal & General, which took the FSA to the Financial Services & Markets Tribunal after it was fined £1.1m for mis-selling endowment mortgages. The tribunal ruled the fine had been twice as high as was justified.

Meanwhile, the holders of these useless underperforming products continue to face shortfalls.

Thursday, June 22, 2006

Bradford and Bingley Hit

Bradford and Bingley Hit

Bradford & Bingley have been hit by new claims for compensation for the misselling of endowment and investment policies. They are thinking of taking a charge to cover potential settlements.

B&B provided a trading statement which did not make it clear as to whether the increase, over the first half of this year, was temporary or indicated a trend in increased claims.


"The volume of claims for compensation related to endowment and investment products has increased markedly, reversing the downward trend established in the second half of 2005.

At this stage it is not clear whether the recent increase in claims is temporary and reflects only an acceleration of future claims or whether this is a new trend.

We are currently reviewing the adequacy of our provisions in respect of these claims with a view to taking a further charge and will provide an update at the interim [results

Why don't the life assurance companies just underwrite these policies, thus reducing the amount of time and money wasted by them on trying to avoid paying claims for compensation?

Friday, June 16, 2006

Standard Life Price Reduction

Standard Life Price Reduction

The current rout of the world stock markets has forced Standard Life to cut the price range for its listing on the UK stock market next month by 10%.

The group's 2.4 million policyholders will have their average payouts reduced to about £1,540 compared to £1,700.

Needless to say, the policyholders are far from happy with this, some are quoted as saying that they are "completely disillusioned" with the company.

The price range for the shares has been brought down from 240-290p to 210-270p.

Sandy Crombie, its chief executive, said the board and its advisers "had a very serious discussion about delaying".

He compared the float process with "a juggernaut, difficult to stop once it is launched".

This is rather ironic as only a few years ago Crombie fought against listing Standard Life, and managed to persuade the policyholders to vote against it. That was back in 2000, when the policyholders would have made ten times as much as they are doing now.

A cynic might question why Crombie still holds office?

Phil Needham, a policyholder, is quoted as saying:

"I'm completely disillusioned with Standard Life.

My own payment was expected to be between 7,000 and 9,000, but this development will knock about 10 per cent off this figure. They ought to have demutualised five years ago.

As a company over the past five years its performance has been appalling

This fall in price leaves them open to a hostile bid.

Given this shambles, and the ongoing industry wide endowment policy fiasco, it is hardly surprising that people have totally lost confidence in Britain's life assurance industry.

Monday, June 12, 2006

Welsh Victory

Welsh Victory

Congratulations to Philip Lewis, who has managed to achieve the first victory in Wales against a building society who sold him an underperforming endowment mortgage.

The Principality has been ordered by Cardiff County Court to pay £4,600 to Mr Lewis, who bought a house in the city for £8,500 in 1975.

More details here: endowment victory.

Monday, June 05, 2006

Time Bar Challenge

Time Bar Challenge

It is reported that Brunel Franklin, an endowment claims specialist, has raised a legal challenge to the Financial Services Authority (FSA) and the Financial Ombudsman Service over time bars on endowment mortgage complaints.

Brunel Franklin believe that the policy is "inconsistent", and hope to change the current time bar deadline for endowment policy holders to make a complaint.

The FSA rules sate that insurers are within their rights to impose a deadline, but that this must be three years from the date the policyholder received a 'red' letter warning of a potential shortfall.

It is estimated that one million people have already been time barred to date.

Brunel Franklin claim that the red letters were misleading and did not state all the facts.

Claims director Ian Allison is quoted:

"Many did not explain to policyholders that their endowment may have been mis-sold and that they had the right to complain about its sale.

As such, a policyholder could not reasonably have expected to know that they were mis-sold the endowment or what to do about it

All of this could be so easily resolved, if the life assurance companies underwrote these useless underperforming policies.

Thursday, June 01, 2006

Standard Life To Float

Standard Life To Float

Standard Life will list on the stock exchange in July, after 98% of members voted to demutualise yesterday.

Had the company not campaigned so hard in 2000 against demutualisation, when the members were persuaded to vote no, the members would have made ten times the amount that they are likely to make now.

Funny old world isn't it?



Hat tip to Charles Pretzlik of the Financial Times, who yesterday mentioned this site and the endowment petition that I am running.

Wednesday, May 31, 2006

D Day For Standard Life

D Day For Standard Life

Standard Life Assurance faces D Day today, as it faces the vote on whether to demutualise and sell shares next month.

The timing is unfortunate, as the world stock markets are currently in decline.

Chief Executive Officer Sandy Crombie said last night:

"What really matters is the appetite of investors to put money in Standard Life."

Standard Life currently plans to sell its shares at between 240p-290p. Policyholders must vote by today on the plan.

The IPO would value Standard Life at £5.5BN. It is somewhat ironic that Crombie back in 2000 fought against demutualisation, when the reward for policyholders would have been 10 times as much.

In 2000 over 1 million Standard Life policyholders voted against a stock sale, after Standard Life spent £10M on a campaign against it.

The company then incurred investment losses after selling £7.5BN pounds of stocks in 2004, to meet stricter rules from the Financial Services Authority.

In other words, this is a forced sale.

Tuesday, May 30, 2006

Gains On Endowments?

Gains On Endowments?

The FT claims that long-term mortgage endowment policyholders, who claimed for mis-selling are now making gains from their policies; according to a survey, the 25 year policies are faring the best.

We shall see.

Thursday, May 18, 2006

Scots Shortchanged

Scots Shortchanged

Linda Costelloe Baker, Scottish legal services ombudsman, warned on Tuesday that the legislation aimed at tightening the regulation of lawyers will not prevent the mis-selling of mortgage policies.

Ms Costelloe Baker said that last year she handled a record 482 complaints, about the way the Law Society of Scotland and Faculty of Advocates handled complaints about their members.

Around 25% of that related to endowment mis-selling complaints.

The Scottish Executive is proposing a new bill which will create an independent commission to handle complaints about lawyers. However, Ms Costelloe Baker said that this would leave the society in charge of practice rules.


"When I was looking at the bill I had endowment misselling complaints very much in mind. I kept on asking myself would this bill stop this happening again, and it wouldn't. Not while the actual regulation is done by the profession.

For example, the society did not expect solicitors to keep business files relating to the sale of endowment policies, so there is little or no evidence on which to base an investigation

Scots who bought policies from solicitors before December 1 2001, when the Financial Services and Markets Act came into effect, do not qualify for a deal from the Financial Ombudsman Service. They can claim compensation through the society, but only to a maximum of £1000.

A pretty raw deal by anyone's standards!

Monday, May 15, 2006



The Observer makes rather a good point, that those endowment policy holders who may be time barred from complaining may still be able to raise a valid claim for compensation, if their policy overruns into retirement.

Bottom line, don't let the life assurance companies that sold and poorly managed these useless policies get off the hook.

Wednesday, May 10, 2006

Prudential Time Bar

Prudential Time Bar

The Prudential is, according to the Association of British Insurers (ABI), the last major life assurance company to introduce time bars to their endowment policy holders wishing to complain about shortfalls on their endowment policies.

The ABI last year estimated that around 2.7 million households in Britain have an endowment policy that is needed to pay off all or part of a mortgage, and that over 80% face a shortfall.

ABI spokesman Malcolm Tarling said that:

"Time-barring will help focus people's minds. The longer people wait to file a legitimate complaint, the harder it is to establish the facts."

The Prudential says that it will write to 110,000 customers to tell them about the new, six-month deadline for complaints.

Legal & General and Nationwide Building Society have also introduced time barring in the last two months.

Not surprisingly the insurance companies want to bring the matter to a close, as they are the ones who are being hit by the claims from their endowment policy holders.

This sorry pathetic mess could be sorted out at the stroke of a pen, if the insurance companies acted responsibly and underwrote these useless underperforming products which they foisted on the British public back in the 1980's.

Tuesday, May 02, 2006

The Policyholders Fight Back

The Policyholders Fight Back

Congratulations to Vincent Cunningham, who has succeeded in taking his life assurance company to court and winning compensation from them for their underperforming product.

This is reportedly the first case of its kind.

Cunningham has successfully sued Friends Provident for compensation on the shortfall on his policy, even though he failed to make a claim within three years of receiving a 'red warning letter' notifying him of a potential shortfall.

He was awarded £1500 by Reigate county court.

It should be noted that the case does not set a legal precedent, because it was heard in a county court. However, it could have implications for the thousands of hapless endowment policy holders who have been told they had run out of time to make a claim against their endowment providers.

As such, the case may encourage others to take a stand against the life assurance companies who are trying to impose their own time bar.

Where one leads, others will follow!

Here is the judge's ruling Vincent Cunnignham vs Friends Provident.

Tuesday, April 25, 2006

Standard Life Bonanza

Standard Life Bonanza

Those of you who hold endowment policies with Standard Life may be in for a small windfall, if the company abandons its mutual status and floats.

Standard Life has posted its policy documents to members outlining the terms of the proposed deal, and inviting them to vote in favour either by post or at a special meeting on May 31.

The company says that 2.4M members will be eligible for free shares.

A Standard Life spokesman is quoted as saying:

"The way shares are being allocated is on the basis of a range of factors, which include the type of policy someone might have with us, how long it has been held and how much is in it."

For example, the company said that a policyholder who had been paying £50 a month on a mortgage-linked endowment since 1984, would receive 1287 shares worth about £3350.

Someone whose endowment policy started in 1989 would receive 544 shares, worth £1440, while a policy started in 1994 would earn 132 shares, worth £350. In each case, this would be on top of the basic allocation of 185 free shares. In addition, the company said everyone who holds their shares for up to 12 months after the initial flotation date, expected in July, will receive one more free share for each 20 they already own.

One question mark yet to be answered is what effect the "mortgage endowment promise" (MEP), given by the company in September 2000, will now have.

The company pledged that, subject to certain conditions being met, as long as future investment earnings averaged 6% a year it would top up any shortfalls on the endowments.

The finer details of the promise revealed that it only applied to those who were told back in 2000 that their policy was at risk of failing to hit its target amount.

Those told after that date were not covered!

In 2004 Standard Life welched on its promise, and abandoned the MEP as unaffordable.

In its proposal document, Standard Life says that if members back its flotation plans, the MEP for qualifying members "will no longer be dependent on a capital growth condition. Instead [it] will be based on investment returns on the with-profits fund".

A spokesman claimed:

"The amount payable to holders of top-up MEP policies will be broadly equivalent to that which would have been paid by Standard Life under the current promise."

We shall see.

Tuesday, April 11, 2006

Royal Liver Fined

Royal Liver Fined

Royal Liver, the Liverpool-based mutual life insurer, has been fined £550K by the Financial Services Authority (FSA) who judged it to be guilty of mis-selling with-profits savings policies to thousands of its elderly customers.

The policies were bundled together with life insurance contracts, which were not suitable for the majority of customers.

Some customers ended up getting back less from their policies than they had put in!

Margaret Cole, the FSA's director of enforcement, said:

"This was a serious case of mis-selling, particularly as a significant number of Royal Liver Assurance's customers were nearing retirement age and did not need the cover they were sold.

The failings were systemic and arose from weaknesses in the firm's sales and compliance processes and persisted over a long period of time. Firms must make sure that they take account of all products which may be suitable when making a recommendation

Royal Liver said in a statement:

"The relevant contracts were withdrawn in the UK in 2004 and all policyholders affected have been contacted and offered a full refund of premiums plus interest at an appropriate rate.

Royal Liver has worked closely with the FSA on this issue to ensure that the appropriate lessons have been learned and controls have been strengthened as a result

Is it any wonder people don't trust the life assurance industry?

Wednesday, March 29, 2006

The Decline of The IFA

The Decline of The IFA

This is Money reports that 10 years ago there were about 350,000 financial advisers. However, increased regulation and the impact of the endowment misselling scandal has severely reduced their numbers down to 55,000.

It seems that it is not just the hapless policyholders who are paying the price for these underperforming and useless products.

Thursday, March 23, 2006

Legal & General U Turn

Legal & General U Turn

Legal & General have announced that they will tell over 600,000 endowment policyholders that they have only six more months to claim compensation, if they believe they were mis-sold the products.

Up until now, L&G now had been one of the few large endowment policy providers to rule out "time-barring" customers.

L&G has started to send out letters to their policy holders this week, covering the new time bar rule and informing the policy holders about their projected returns/shortfalls on polices.

Only Prudential and Nationwide Building Society are keeping an open commitment to consider complaints.

The clock is ticking.

Tuesday, March 21, 2006

The Dangers of Interest Only Mortgages

The Dangers of Interest Only Mortgages

The Times has a good article about the dangers of interest only mortgages, I recommend that you read it.

Wednesday, March 08, 2006

The Danger of False Hope

The Danger of False Hope

Ivan Lewis, Treasury economic secretary, has warned that the thousands of Scots who were mis-sold endowment mortgages by solicitors should not hold out "false hope" of obtaining compensation.

Lewis admitted that it was a scandal that a legal loophole prevented those, who bought a policy through a lawyer before 2001, from seeking financial redress in the event of a shortfall

He is quoted as saying:

"One of the difficulties (with a new financial safety net) is it's not retrospective. I do have great sympathy for people who have been caught out by endowment mis-selling in Scotland but there is a genuine problem."

Scots who bought policies from solicitors before December 1 2001, when the Financial Services and Markets Act came into effect, do not qualify for a deal from the Financial Ombudsman Service.

The solution is for the life assurance companies, that manage these useless policies, to underwrite them.

Friday, March 03, 2006

HBOS Hit By Endowment Losses

HBOS Hit By Endowment Losses

HBOS has announced that it made £4.81BN in pretax profits last year.

However, owing to the endowment scandal it had to take a £260M provision for endowment mis-selling.

Thursday, March 02, 2006

Lloyds Endowment Hit

Lloyds Endowment Hit

Last week Lloyds reported profits of £3.82BN for 2005.

However, the charge for compensation for paying customers for mis-selling endowment policies rose from £100m in 2004 to £150m in 2005.

Whilst this cost affects the results, and of course the shareholders, I doubt that the people who sold these underperforming and useless products will have been affected; ie the senior managers will still receive bonuses.

Wednesday, March 01, 2006

You Have Been Warned

You Have Been Warned

The Financial Services Authority have stated that it is standard practice for endowment providers to continue paying commissions to mortgage advisers, while policies remain active, even if the holders have paid off their mortgage.

This means that even though the endowment policy that you hold may not reach target, the person/company who sold you the mortgage will still be receiving a commission.

This of course will reduce the value of the policy.

Happy with that?

Tuesday, February 28, 2006

Legal & General Offer Good News

Legal & General Offer Good News

In a rarity for this site, I am again pleased to be able to write that a life assurance company is offering their long suffering endowment policy holders some good news.

Legal & General announced last week that their with profits fund experienced a 19% investment return during 2005. This meant that L&G could increase terminal bonuses for the majority of its 900,000 with-profits savers.

Additionally, L&G said that it had reduced the penalties policyholders had to pay if they cashed in their policy early.

The bonuses would vary from policy to policy, but people with a conventional endowment policy would receive 0.75% on their sum assured and 1.25% on bonuses they had previously been paid.

Someone with a 25-year low-cost mortgage endowment policy into which they have paid £50 a month will receive a final payout of £45,769, compared with £42,743 if the policy had matured a year earlier.

L&G claim that the strong investment returns seen during the year, were likely to reduce the number of people with endowment mortgage shortfalls.

In 2004, 55% of their policyholders were warned that their policy would not be large enough to repay their mortgage.

This "good" news from L&G, I would remind you that these policies were designed to pay off the mortgage, again calls into question the skills of some of the other life assurance companies who have announced cuts this year.

Wednesday, February 22, 2006

Good News From The Pru

Good News From The Pru

Those of you with endowment policies, managed by the Prudential, have something to celebrate.

They have announced a 20% return on their with-profits fund, after increasing the equity backing of the £83BN fund from 64% to 74%.

The rise of 17%, after tax, has been passed on to their customers.

Endowment policies rose by over 16%, and maturing policy pay-outs were higher than a year ago.

Ned Cazalet, an industry commentator, said that the performance was "head and shoulders above everybody else a 45% cumulative return over the last six years compared to an average of 20% for the rest".

During 2005, whilst the Pru was adding to its equity backing (equities plus property), Standard Life (for example) was reducing the equity backing of its fund from 50% to 45%.

Standard Life then went on to whine and bleat earlier this month that the reason for their dismal performance was because the FTSE-100 had fallen from 6930 six years ago. Had they been more flexible and better organised they could have taken advantage of the rising market, just as the Pru did.

Almost all of the Prudential's maturing endowments paid off their mortgages last year, and the number of "red" policies off track has dropped from 65% to 16%.

How many other endowments can claim that?

This good performance by the Pru raises some very uncomfortable issues for many of the other life assurance companies, that have been performing dismally:
  • Why have many of the others performed so badly?

  • Why do they continue to blame the markets, when it is clear that it is the management of these funds that is to blame?

  • Why do they continue to pay their senior staff bonuses, when their policies are failing their customers?

  • Why do they make "management" charges on these failing and useless endowment policies, when they are clearly not capable of running them effectively?
These issues should be taken up by the millions of us who are being poorly served by many of the life assurance companies. A class action for mismanagement would definitely bring the issues onto the table, and force a resolution to this growing crisis.

Monday, February 06, 2006

Standard Life Fails To Deliver

Standard Life Fails To Deliver

More bad news for people holding useless and underperforming endowment mortages.

Standard Life have warned their 2 million with-profits customers that policies maturing this month will pay out on average 5% less than before, on comparable policies; this is despite the fact that share prices are booming.

The annual bonus rates on conventional with-profits policies are unchanged, but terminal bonuses are down.

The maturity value of a Standard Life 50 a month, 25 year mortgage endowment policy is now £40,459 this month, that is a massive fall of 18% when compared to the same policy of £49,511 in February last year.

John Gill, Standard's UK life and pensions managing director finance, is quoted as saying:

"By smoothing returns, we have protected policyholders from the full drop in asset values between 2000 and 2002."

Others are not taken in by this pr hype.

Clive Scott-Hopkins, from independent financial advisers Towry Law, is quoted as saying:

"Standard Life is obviously losing its competitive edge with this very poor result. The Norwich Union typical endowment payout last month at £50,295 was 25% higher than these results."

Standard Life sold £7BN of equities in 2004 after guidance from the Financial Services Authority on "strengthening" its financial reserves.

The result being that it now unable to take advantage, or rather its hapless endowment policy holders are unable to take advantage, of the booming stock market.

Given the fact that other insurers have performed better than this (even if their endowment policy holders are also out of pocket), I would suggest that the holders of Standard Life policies should be considering asking some very hard questions indeed about the quality of management of their funds.

Indeed they may laso like to consider aksing some hard questions of the FSA, as to why it gave such absurd advice.

Wednesday, February 01, 2006

The Financial Services Compensation Scheme Online Claim

The Financial Services Compensation Scheme Online Claim

The Financial Services Compensation Scheme (FSCS) has launched an online service today, to help people who think they may have been mis-sold an endowment policy decide whether they have a claim that FSCS may be able to help with.

FSCS is the UK's statutory fund of last resort for customers of financial services firms.

The FSCS can pay compensation to consumers if a financial services firm is unable, or likely to be unable, to pay claims against it.

The service is free to consumers.

The new online questionnaire is available on the FSCS website,

It is designed to help speed up response times for consumers. It will help people determine whether FSCS may be able to help with their endowment complaint, and will automatically generate an application form for those who may have a claim.

Loretta Minghella, FSCS chief executive says:

"FSCS plays a vital role in protecting consumers and maintaining confidence in the industry.

Without our help thousands of consumers would have nowhere to turn. Since we became operational on 1 December 2001, FSCS has paid consumers over £650M in compensation.

Over the past couple of years endowment claims have been received at unprecedented levels, way beyond our expectations.

The processes we are putting in place should ensure a faster response for consumers and help us to deal with their enquiries more quickly

The majority of new investment claims received by FSCS over the past couple of years relate to mortgage endowment claims.

It is expecting to receive 22,000 new endowment claims in the financial year 2005/06, and a further 26,000 in 2006/07.

This compares to just under 9,000 new endowment claims received in 2004/05.

Whether the FSCS will be able to handle this extra workload remains to be seen.

The solution, as I keep reminding you all, is for the life assurance industry to underwrite these useless underperforming products.

Monday, January 30, 2006

Guardian Assurance Fined

Guardian Assurance Fined

Guardian Assurance was fined £750K last week by the Financial Services Authority (FSA), for its poor complaints handling procedures over this period.

The FSA said that the numbers of complaints made to Guardian about failed endowment policies, which were being rejected, rose from 29% to 77% after the company introduced new complaints handling procedures.

Guardian will now contact the 5,600 customers whose complaints were rejected during this period.

The company has also set up a helpline for customers with concerns, and said it welcomes their questions.

Ring 0845 701 0210 to speak to them.

Those of you who have managed to extract compensation from Guardian should revisit that comepnesation, and see if the amount is actually enough.

All of this extra expense, damage to reputation and hassle could be avoided if the life assurance firms finally bit the bullet and agreed to underwrite these useless and failing policies.

Thursday, January 26, 2006

Legal and General's Record Year

Legal and General's Record Year

Congratulations to Legal and General (L&G), the life assurance firm, who have announced record results today.

L&G new business has risen 29% compared with the previous year, to £1.3BN, as a result of strong demand for savings products and growth in personal pensions.

The 29% increase in new business was at the top end of analysts' expectations.

Sales also rose by 27%, in the final quarter of the year.

Tim Breedon, chief executive, said:

"This has been a year of remarkable growth for Legal & General. Our UK new business grew by almost a third in 2005 and our investment management business won a record £17.1BN."

Now if they could address the concerns of those of us with failing endowment policies, by underwriting these useless products, we would all be able to open the champagne bottles and toast their success.

Friday, January 20, 2006

Norwich Reduces Payouts

Norwich Reduces Payouts

Norwich Union have dealt a body blow to their long suffering endowment mortgage policyholders, who have been warned to expect a low payout this year.

This is despite the fact that Norwich's main profits fund achieved an overall return of 17.7% before tax.

A policyholder with a 25-year, £50 a month Norwich Union endowment mortgage maturing this month will receive 4% less than he would have done if the policy were to have matured in 2005.

Norwich stated:

"In general, shorter-term policies show increases or small decreases compared to equivalent policies maturing a year ago, while those with a term of 20 and 25 years will generally be lower."

However, Norwich Union went on to say that in many cases an increase is seen when the surrender value of the policy a year ago is compared to the maturity value now.

Well of course it would, surrender values are normally lower than maturity values!

Please don't treat your policyholders in such a patronising manner.

Monday, January 16, 2006

Time Barring Petition

Time Barring Petition

Merryn Matt has set up an online petition calling for the practice of time barring to be ended.

Extract from the site,

"Did you know that the Financial Services Authority (FSA) has slapped time limits - known as 'Time Barring' - for compensation claims against Life Companies for endowment policies which may have been mis-sold?

Time Barring is unfair, unclear and misleading. Approximately 1 million of the UK's 7.5 million endowment policyholders may already be Time Barred from claiming according to the FSA.

These rules operate in favour of the companies that sold the policies - saving them and costing you millions of pounds.

How can this be right?

This petition calls on the Government and the Financial Services Authority to put an end to the confusion and dishonesty surrounding mis-sold endowment policies, once and for all

I wish her well.

Don't forget to sign my petition though:)

Friday, January 13, 2006

Guardian Assurance Fined

Guardian Assurance Fined

Guardian Assurance and its associated company Guardian Linked Life have been fined £750K by the Financail Services Authority (FSA) for mishandling endowment complaints.

This is the fourth time that the FSA has fined an insurance company for mishandling complaints.

The FSA said that Guardian's complaints procedure had "serious systemic flaws".

As a result, 5,600 customers had their complaints wrongly rejected, and thus could have lost out on compensation.

Margaret Cole, the FSA's Director of Enforcement, said:

"Guardian failed to treat its customers fairly by exposing those with a valid complaint to the risk that their complaint could be rejected inappropriately.

Consequently, they may not have received the compensation to which they were entitled.

These failings exposed a high number of consumers to potential financial loss

The FSA role of shame:

-Friends Provident, December 2003, fined £675K
-Dunbar Assurance, March 2004, fined £725K
-Abbey National, May 2005, fined £800K

Between 1988 and 1995 Guardian sold 233,000 endowment policies, before it stopped marketing them.

It received nearly 20,000 complaints from April 2000 to the end of 2004.

At one stage it was rejecting more than three quarters of all its complaints.

I wonder how many other insurance companies are mishandling complaints?

Tuesday, January 10, 2006

FSA Tries To Clean Up Its Act

FSA Tries To Clean Up Its Act

The Financial Services Authority (FSA), stung by recent criticism of its poor litigation record, is now trying to clean up its act.

The FSA has created a new unit to 'stress test' enforcement cases, before they are taken to formal disciplinary review.

The new litigation and legal review unit aims to review the evidence and recommendations that the FSA's enforcement division puts before the Regulatory Decisions Committee (RDC), which makes the FSA's disciplinary decisions.

The change is not receiving unanimous support. One City lawyer warned that the unit could potentially "result in a bottleneck", and drastically slow down the disciplinary process.

The FSA's came under strong criticism during 2005, most notably after the rejection of its endowment misselling case against Legal & General by the Financial Services and Markets Tribunal.

FSA director of enforcement Margaret Cole said it was hoped that the new unit would result in more successful rulings before the RDC, by ensuring that cases were "effectively stress-tested before going before the RDC".

We shall see.

The most effective change that the FSA should make, would be to compel the life assurance companies to underwrite their useless and underperforming endowment policies.