The Endowment Diary

The Endowment Diary


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

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.