The Endowment Diary

The Endowment Diary


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

Monday, December 10, 2007



Scotland on Sunday reports that two of the UK's largest endowment companies, Standard Life and Norwich, now have a staggering 1.4 million endowment policies underwater.

Guardian, which sold endowments for Nationwide, refused to take part in the survey. A spokeswoman for the company claimed that the omission was due to "an administrative oversight".

The report goes on to state that 90% of Norwich Union's 764,609 policyholders are now receiving red letters, while at Standard Life the proportion is 88%. At Friends Provident, 89% are in the red.

It's going to be a bleak Christmas for endowment policy holders.

Tuesday, November 27, 2007

Bleak News

Bleak News

Money Management's upcoming December issue survey shows a bleak outlook for those who hold endowment policies.

On average, a 25 year policy 10 years into its term needs to grow 6.9% per annum until the end of its term in order to meet its £50K sum assured.

The average 25 year policy 15 years into its term needs to grow 8.6%, while policies 20 years into their term need to grow an average of 8.2%.

Given the lousy levels of returns on most endowment policies, these required returns are very unlikely to be achieved and endowment holders can expect serious shortfalls when their policies mature.

Congratulations to the fund managers for doing such an "excellent" job of "managing" these policies, yet still being able to pay themselves a very nice management fee each year despite "managing" loss making policies.

Tuesday, November 06, 2007

L&G Increase Their Charges

L&G Increase Their Charges

Recently Legal and General, my endowment provider, wrote to me to inform me that my two endowment policies that I hold with them will most likely make a loss.

Using three projected returns, the 1987 policy (target £35000) will produce the following results:

-4% shortfall £5400
-6% shortfall £2700
-8% surplus £ 300

The 1991 policy (target £39700) will produce the following shortfalls:

-4% shortfall £10200
-6% shortfall £ 7500
-8% surplus £ 4600

I received another letter from them today, informing me of the following:

1 That they have changed the rules to give them the right to use fund managers other than Legal & General Investment Management Ltd, if they believe that it is necessary.

Don't they have confidence in their own management skills?

2 They are increasing the management fees for managing my policies. Seemingly they have compared their fees to other endowment providers, and feel that an increase is necessary!

The good news is that the new fees (after a search on the back of their letter, it seems that the fees are going up by 0.06% of the value of the investment per year) are, in the opinion of L&G, "highly competitive with typical market rates".

So that's alright then!

A couple of questions that have crossed my mind:

1 Why the hell are they raising the fees, when their "management" of my policies has produced losses?

2 Why are they charging more for their "management" services, when they have said that they may in fact use other fund managers?

Given the losses that my funds are projected to "yield", an increase in charges will simply make matters worse.

These endowment providers are very relaxed about changing the rules, when it suits them. Now is the time for them to change the rules to suit the hapless millions who own these useless, badly managed, costly and underperforming products.

Underwrite them!

Friday, October 19, 2007



There appears to be something of a sting in the tail for some long suffering endowment holders who make a successful mis-selling claim through the Financial Ombudsman Service (FOS), and then find that in fact their endowment policy recovers to leave no shortfall.

In the event that happens, the policy holder may have to repay money to their adviser.

A county court in Wales has ordered the claimant to pay back the sum of £1689, if their endowment manages to hit its original target of £13,000 in May 2010.

In September the FOS ordered retired independent financial adviser Eifion Hughes to pay the compensation to his client. However, Hughes refused to pay stating that the ombudsman had come to the wrong decision.

In an unpleasant irony, Hughes was then taken to court by the client who was being advised by an IFA acting as a claim-chaser.

The judge has upheld the complaint, but stipulated that the money would have to be paid back to the adviser on the policy's maturity if it reached above its expected value.

Hughes is quoted in The Herald as saying:

"At last this appears to be a victory for common sense. If the client loses out and it is the adviser's fault, he should pay out, but if there is no loss and perhaps even an extra gain, why should the adviser have to offer them money? Natural justice has won the day."

Evan Owen, chairman of the IFA Defence Union, said:

"It is refreshing to see the people who administer the law of the land reaching such conclusions. Let us hope that Lord Hunt takes this view on board as part of his review."

Quite right too!

As to whether many endowment polices will actually meet their targets, is open to conjecture. I can personally state that the two polices I hold with legal & General look very unlikely to get anywhere near their target.

It is also reported that almost 90% of Standard Life mortgage endowments are still highly unlikely to meet their targets.

However, I would also note that to some extent the IFA's (unless they were proven to be negligent) should not be the target of policy holders' wrath.

These lousy products were sold in the same manner as cars, TV's and other consumer products. Their sole purpose being to pay off the mortgage.

As a result of hidden/excess charges, lousy management and misrepresentation of the prospects by the funds themselves, they are massively underperfomring.

They are not fit for purpose.

It should not be the IFA's that are targeted, but the fund managers. The only solution to this shameful scandal is for the fund mangers to underwrite their useless, badly managed, products.

Monday, October 08, 2007



Much like the depressing inevitability of the return of an unloved season I received two red warning letters from my endowment provider, Legal & General (L&G), the other day. I am the "proud" owner of two endowment policies taken out with Legal & General, one in 1987 and the other in 1991.

Needless to say, neither are on target to reach their objective (ie to pay off my mortgage).

Legal & General claim, using three projected returns, that the 1987 policy (target £35000) will produce the following results:

-4% shortfall £5400
-6% shortfall £2700
-8% surplus £ 300

The 1991 policy (target £39700) will produce the following shortfalls:

-4% shortfall £10200
-6% shortfall £ 7500
-8% surplus £ 4600

Hardly a "stellar" performance is it?

The question remains though, how is it that some endowment companies have been able to manage their funds sufficiently well so as not to produce a shortfall whilst Legal & General haven't?

Tuesday, September 18, 2007

The Curate's Egg

The Curate's Egg

The Telegraph reports that around 260,000 extra mortgage endowment holders have seen their policies meet their targets in the past year.

It seems that buoyant stock market has helped some policies recover their lost ground over the past few years. However, as to whether a particular policy that had previously been deemed to fail to meet target will now hit target very much depends on a number of variables; not least the quality of the company that is managing the endowment policy.

The Telegraph notes that, eg:

"Prudential's fund has been strong. The proportion of its policies that are red has significantly reduced over that period too. In 2003, 44 per cent of its policies were flagged up as red, now the figure is 15 per cent of the remaining 201,000 policies.

To date none of the Prudential's policies has failed to pay out the full target amount

Those with Scottish Amicable have also seen an improvement. In 2003, Scottish Amicable had 65% of its policies listed as red, this figure now stands at 10%.

However, those who hold Legal and General policies have not been so fortunate. In 2004 over 55% of its policies were expected to fail to meet their repayment value. The figure now stands at 40%.

Standard Life is even worse, as it has seen its red policies rise from 86% to 88%.

As can be seen from the above, the performance is very much dependent on the "quality" of the fund managers.

Friday, August 31, 2007

The Lautro 12

The Lautro 12

The recently published shameful case of the so called "Lautro 12", appears to be causing more than a few ripples in the financial services industry.

It seems that the knock on effect of the "Lautro 12" is that many Independent Financial Advisers (IFAs) may have paid out too much compensation for mortgage endowment complaints.

Needless to say, if this were to be the case, they may themselves be entitled to financial compensation from the endowment providers.

The Lautro 12 were found to have mispriced Lautro premiums, which lead them to give their hapless customers unrealistically high maturity figures between 1988 and 1994.

Other providers have also mispriced projections but, unlike the 12, have not necessarily paid any consumer redress.

OAC Actuaries and Consultants chief executive, Roger Grenville-Jones, said:

"Where compensation for misselling has been paid, the amount of compensation is automatically increased to adjust for the policy being too small, at the expense of the firm paying the compensation, but only up to the present time."

Whilst the extra sums that advisers have had to pay out due to mispricing by providers is difficult to estimate, it is estimated that approximately £83M has been paid out in compensation for endowment misselling.

Compliance expert Adam Samuel said:

"Under-pricing will have reduced surrender values which are deducted from the amount required to repay the loan and other extra costs to produce the compensation amount.

If the insurers had set the premiums correctly, the surrender value would be higher and this would have brought down the compensation

Shakespeare Putsman LLP partner Gareth Fatchett said:

"We have had a positive opinion from specialist counsel about taking action on behalf of advisers. It is arguable that redress by IFAs could be reclaimed against providers who are shown to have used incorrect charging assumptions. Potentially, this creates a whole raft of claims from IFA firms who have paid redress needlessly."

IFA Defence Union chairman Evan Owen sums this disgraceful farce very neatly:

"IFAs should not have had to waste time defending complaints, paying case fees triggered by false shortfalls and forking out compensation that others were responsible for. The providers must be held to account."

As this site has noted many times, the failure of these useless policies is down to their bad design; ie they were not fit for purpose. On that basis alone, it is most assuredly the endowment providers' responsibility to clear this mess up.

As I have noted many times before, were they to agree to underwrite these failed products that they foisted on an unsuspecting generation of house buyers, much of the distress being endured by their hapless customers and IFAs (unfairly caught in the middle) could have been avoided.

Anyone care to take any bets as to whether the endowment providers will "step up to the plate" and admit their responsibility?

Thursday, August 30, 2007

A Bumper Year

A Bumper Year

I received my 2006 with profits statement from my endowment provider (Legal & General) yesterday. Imagine my delight when I read the following in the covering note:

"We're pleased to be able to tell you that the investments underlying your policies have performed well during 2006 generating a return of 12% (before tax and charges) over the year."


Unfortunately, on delving deeper into the document I saw that the actual portion of that 12% allocated to me (re annual bonus rate applied to existing bonus and annual bonus rate applied to basic sum assured) was a less than staggering 2%.

The reason for this disparity?
  • Tax, fair enough, that takes the 12% down to 11% according to L&G

  • Charges, which are not disclosed

  • Smoothing, to ensure that "short term fluctuations" in the value of investments are not immediately reflected in payouts
Either the charges are astronomical or the "smoothing" is far from "smooth".

I wonder why L&G don't disclose their charges in this this document?

What a joke!

Friday, August 24, 2007

The List of Shame

The List of Shame

Congratulations to Money Management magazine for naming and shaming the insurance companies and endowment providers, who tired to hoodwink their customers, that the Financial Services Authority (FSA) tried to cover up.

When these shamed companies sold their products to their unsuspecting customers they used industry standard charges laid down by Lautro, the industry regulator at the time, to show the returns etc that would be expected on the policies..

However, their actual charges levied by these shamed companies were often much higher sometimes double the Lautro rate. Needless to say, they chose not to tell their customers this. This shoddy practice took place between 1988 and 1995.

It is estimated that around 200,000 policyholders, with low-cost mortgage endowments, could be owed up to £200m by these companies as a result of this practice.

The list of shame includes:

-Standard Life
-Scottish Widows
-Prudential, owned Scottish Amicable
-Scottish Mutual
-Scottish Provident, now owned by Resolution.

Companies were taking up to 0.75% a year in charges from the fund. However, their customers were given the impression that the charge was only 0.3% (ie less than half).

Some companies, including Axa, Legal & General and Clerical Medical, have set aside money to make good these shortfalls. Others, such as Standard Life, have so far refused.

Shoddy practice by a very shoddy industry, and a disgraceful attempted cover up by a toothless partisan FSA.

It is hardly surprising that the British consumer has lost all faith in the financial services industry.

Monday, August 20, 2007

Named and Shamed

Named and Shamed

The Financial Services Authority (FSA) is to be forced to name and shame the 12 endowment mortgage providers which misused Lautro projections in setting premiums.

Their misuse of the Lautro projections meant that customers were given unrealistically high maturity figures.

The FSA have been forced into the embarrassing climbdown by the Information Commissioner's Office, which has upheld a freedom of information request to name the 12 firms.

It is estimated that several hundred thousand policies could be affected by this ruling.

The FSA had stubbornly refused to name the firms, claiming that it would affect future informal reviews, damage market confidence and infringe the providers' rights. Proving once again that the FSA is an ineffectual body, that does not stand up for the consumer when faced with a conflict of interest.

The FSA conducted an informal mortgage endowment review in 2001 which found that between 1988 and 1994, 12 providers used standard Lautro charges to set premiums without informing consumers that their actual charges were higher. This meant consumers would need to pay higher premiums to meet their expected maturity figures.

The FSA said that the providers had "breached a contractual warranty and/or of material pre-contractual misrepresentation in the sale of endowment mortgages".

The FSA has been of little help to the victims of the endowment scandal. One has to ask, what is the point of the FSA?

Tuesday, August 14, 2007

Making Money on Endowments

Making Money on Endowments

The Telegraph has a good article explaining how it is possible, if you are well briefed and prepared to take the risk, to make money on endowments by investing in Teps (Traded Endowment Policies).

There is also a novel bonus, if you get the right policy, of earning a nice little lump sum if the original owner of the policy dies.


"Life insurance is sold as part of an endowment policy; when a Tep is sold on, that insurance still covers the person who initially held the policy. But any payment made as a result of that individual's death will be paid into the Tep, says Modray.

It is not necessarily a palatable way of making returns, but a "deed of assignment" when the policy is sold will ensure that the money is added to the fund if the original policyholder dies

The lesson here is that there is always a way to make money; if you are brave, lucky and well advised.

Tuesday, August 07, 2007

Time Bar Challenge

Time Bar Challenge and CPH Financial Service have launched a legal challenge against the practice of endowment providers using a timebar to prevent claims being made for underperforming endowment policies.

Brunel and CPH have made a request for a judicial review, to establish if setting a time frame in which a complaint must be registered is fair and legal.

At present, endowment providers can "time bar" a complaint if the consumer makes the claim more than three years after they first receive a letter warning them of a "high risk" of shortfall on their policy.

Firms must also send out a "red letter" six months before the deadline, informing the consumer of the impending date.

It is estimated that the number of people affected by time barring exceeds 2 million.

Ian Allison, corporate relations director at, said:

"This is a very exciting day for us all.

We have been aggressively lobbying against time bars for three years and we are now reaching a point where there is a serious chance of a positive outcome for all those people who have been time barred.

We have always believed the time bar process and the communications with consumers was wrong and fundamentally flawed.

Many customers never received shortfall letters. For those that did, the letters never mentioned the issue of a mis-sale.

The use of these letters therefore to legally start the time bar clock ticking is a disgrace. This was never fair and we believe a judicial review will find in favour of the consumer

I wish them well with their challenge. The fact remains that the insurance companies will do whatever they can, to avoid taking responsibility for the endowment mortage scandal.

Friday, August 03, 2007

A Slice of The Pie

A Slice of The Pie

Standard Life has promised its two million policyholders a windfall payout from its £1.3BN orphan fund pot, surplus cash held in its with-profits fund.

Standard Life said that it would pay the cash to qualifying policyholders as their policies matured, rather than paying out one lump sum to all its customers in one go.

The orphaned assets are pots of surplus cash that inflate insurers' solvency figures.

Aviva, parent company of Norwich Union, will divide its £4BN orphan assets between shareholders and policyholders and Prudential is also considering what to do with its pot of surplus assets, worth £9BN.

A Standard Life spokesman told The Times:

"When other insurers, such as AXA, distributed their orphan assets, they made a one-off payment to all policyholders.

We are taking a different approach and are giving enhanced payouts when a policy reaches maturity, or when it is surrendered or transferred.

We are doing this because we want to retain some of this cash cushion over the life of our policies, some of which have decades to run

This approach means that investors will be forced to keep their policies until maturity, if they wish to receive their share of the pot.

Monday, July 23, 2007

Stating The Obvious

Stating The Obvious

Congratulations to Baronworth Investment Services, who have stated the obvious; namely that a "degree of disillusionment" among endowment policy holders is a key factor in the decision to sell or cash-in.

Colin Jackson, director of Baronworth Investment Services, sates:

"There's a lot of adverse press about endowment policies, some of it quite justified."

No kidding!

Friday, July 20, 2007

The Cost of The Endowment Scandal

The Cost of The Endowment Scandal

The endowment mortgage scandal continues to ratchet up costs.

The Financial Services Compensation Scheme (FSCS) said that it handled 31,260 claims during the year to the end of March 2007, 21% more than during the previous 12 months.

FSCS said that 90% of the new claims it received related to endowment mortgages, with people unable to claim compensation for being mis-sold one of the mortgages because the firm or intermediary they bought it from had wound up.

Around 50% of those who complained about their endowment received compensation, getting an average of £1,900 each.

Overall the FSCS paid out £149M in compensation, around £66M of which related to claims about general insurance, with the rest going to claims over endowments, personal pensions and other investment issues.

The costs will continue to mount.

Monday, July 16, 2007

Bad Management and Inept Regulation

Bad Management and Inept Regulation

A recent article in the Daily Telegraph about the ongoing endowment scandal, hits the nail firmly on the head when it comes to the question as to why these useless products have performed so badly.


-Bad management from the insurance companies

-High costs levied by the insurance companies for their bad management

-Inept regulation from the FSA, forcing the insurance companies to invest in under performing assets.

No wonder the hapless endowment policy holders feel that they have been screwed!

Tuesday, June 26, 2007

Every Cloud Has a Silver Lining

As can be seen from this article in the Evening Star, whilst the long suffering holders of endowment polices may be suffering, claims firms are doing rather well out of the endowment mortgage scandal.

Experiences Connect, of Ipswich, has seen turnover rise from £344K in 2005 to £925K in 2006 with forecasts for 2007 of £1.4M.

The firm aims to have increased its workforce by between 15 and 20 new members of staff, within the month.

As the old saying goes:

"every cloud has a silver lining".

Monday, June 18, 2007

Norwich Union's Inherited Estate

Norwich Union's Inherited Estate

Norwich Union with-profits policyholders are demanding cash rather than extra bonuses, when the insurer comes to distribute its £5BN inherited estate.

Inherited estate being money in a with-profits fund that is surplus to requirements.

Norwich Union is currently in the process of deciding how to distribute its fund fairly to its 1.1 million policyholders. Prudential is also doing the same wrt its 4 million with-profits policyholders.

Former gas regulator, Clare Spottiswoode, has been appointed to represent the interests of Norwich's with-profits policyholders.

Those affected are in two of its with-profits funds, the old Commercial Union fund and the old General Accident fund. Those in the Norwich Union and Provident Mutual funds will not get anything, because they got windfalls when the insurer joined the stock market ten years ago.

Mrs Spottiswoode has held roadshows across the country to canvass the views of policyholders, and has also commissioned a survey of their views. The results of the roadshows and surveys show that twice as many policyholders would prefer to have cash in hand, rather than extra bonuses.

Clearly the long suffering policy holders have lost faith in the concept of endowment mortgages.

Who can blame them?

Tuesday, May 29, 2007

Standard Life Ignore Policy Holders

Standard Life Ignore Policy Holders

Standard Life treated their endowment policy holders with contempt today, at its first annual general meeting.

Standard Life faced repeated calls to specify the aggregate level of the shortfall on endowment policies, which they refused to reveal.

Sandy Crombie, the Group CEO, admitted that shortfalls on endowments exceeded the staggering figure of £1.3BN that the insurer had identified in its now-closed Heritage with profits fund.

However, the company didn't make any firm pledge to calculate the overall shortfalls faced by policyholders.

Seemingly the expectations of policy holders are, in the words of outgoing chairman Brian Stewart "unreasonable".

Crombie added:

"We cannot generate money that is not there. We are trying exceptionally hard to make sure the fund continues to perform for those who are invested in it."

Hardly much comfort for the hapless policy holders.

Why not come clean with them?

Thursday, May 24, 2007

Endowment Complaints Tailing Off

Endowment Complaints Tailing Off

In its annual review, the Financial Ombudsman Service (FOS) said that endowment complaints are tailing off.

Last year's review reported 69,149 endowment problems, while this year the figure had fallen to 46,134.

Chief ombudsman, Walter Merricks, said:

"This year marked the completion of over 500,000 financial disputes by the FOS since we were set up in 2001. Half of these complaints have involved mortgage endowments, although the record numbers of these cases is now at last decreasing, as we had predicted was likely to happen."

That does not of course mean that the problem is resolved, or indeed has gone away.

Many endowments were a "crock" form start to finish!

Monday, May 14, 2007

The List of Shame

The List of Shame

Those of us who are unfortunate enough to have bought an endowment policy in the late 1980's and early 1990's may find an analysis produced by Money Management to be of interest.

It shows that, despite rising stock markets, payouts to policy holder continue to fall in most cases.

They compared policies maturing in 2007 with those maturing in 2006, for a male non smoker investing £50 from the outset over 25 years. The variation in returns was staggering. The average growth rate was 8.5%.

The top performer was Reliance Mutual with a return of 13.6%. However, the laggards showing below average returns were as follows (%):

Norwich Union - 8.3
Canada Life - 8.3
CGU - 8.2
General Accident - 8.2
Brittanic Assurance - 8.2
Clerical Medical - 7.9
Legal&General - 7.7
Scottish Widows - 7.3
Scottish Life - 7.2
Standard Mutual - 6.8
Scottish Mutual - 6.8
Friends Provident - 6.7
Equitable Life - 6.5
Eagle Star - 5.7

Well done!

The key question that policy holders should be asking of their endowment company, if they are in one of the under performing ones, is why are your returns worse than others?

Does that not reflect badly on the quality of management, and on the charges levied against the fund?

Wednesday, May 09, 2007

Standard Life

Standard Life

Congratulations to Standard Life on their bumper first quarter results, worldwide sales rose by 40% to £3.92BN.

The question that the endowment policy holders are asking is, whether these bumper results will be reflected in bumper returns on their flagging endowment policies.

Highly unlikely I would say, as since July 2006 the masters of Standard Life are the shareholders not the policy holders.

Monday, April 23, 2007

Bridging Loans

As thousands of underfunded endowment policies start coming to the end of their lives, the demand for bridging loans is expected to rise; as people struggle to make up the shortfall on their under performing endowment policies.

Bridging loans are a very expensive way of borrowing, with monthly rates of between 1.5% to 2% (akin to credit cards).

People should exercise due care when thinking of taking out one of these expensive products.

Monday, March 26, 2007

Sacked By Text

Cheshireonline reports that police had to be called after a Chester businessman sacked his workers by mobile phone text message.

"Lee Wilson, MD of Stanley Porters and Co Ltd, texted staff at 7.45am on Wednesday, with the words: 'Due to the lack of professionalism and poor overall performance of the Chester office, i hav no option but to let u go.

'Ur pay wil be calculated and paid on pay day. U are not required to go into the office. All belongings wil be sent to u.'

But the four workers, whose job was to win compensation for home owners who had been mis-sold endowment mortgages, collected their belongings from the Union Street offices and asked for the attendance of police to prevent trouble."

Monday, March 19, 2007

Standard Life

Standard Life

In rather a curate's egg development, Standard Life is due to write to its 750,000 endowment policy holders informing them that their endowments may not pay off their mortgages.

However, Standard Life will attempt to sugar the unpleasant pill by telling its hapless policy holders that the shortfall may not be as bad as it was anticipated a year ago.

So that's alright then!

It is estimated that around 90% of Standard Life's policies are not on target to meet the debt that they were meant to cover.

A Standard Life spokesman said:

"For many customers, a small shortfall will not present a problem, as these consumers have already paid off the mortgage, and were holding on to their policies for savings purposes. Others may be fully aware of the position of their contract, but have other savings to make up the shortfall, and so be comfortable with the situation."

I find the logic of the above to be highly dubious. Was not the point of taking these useless policies out to cover the mortgage?

Therefore how can a policy holder be "comfortable" with a shortfall?

Thursday, March 01, 2007

HBOS Profits

HBOS Profits

Congratulations to HBOS, which has announced a 26% rise in profits for 2006 to £2.12BN.

This despite that fact that last year HBOS had to set aside a £95MN provision for compensation related to customer complaints over the bank's sale of endowment mortgages.

Tuesday, January 23, 2007

Insurers Cash Grab

Insurers Cash Grab

Aviva and Prudential are planning to divert billions of pounds of surplus cash in their with-profits funds to shareholders, despite the fact that those who hold endowments, bonds and pensions are suffering lousy returns.

Aviva own Norwich Union, which recently warned 90% of its endowment policy holders to expect shortfalls on their policies. Aviva wants to pass a large part of the £4BN of inherited estate, in its Commercial Union Life and CGNU Life with-profits funds, to shareholders in 2008.

It is estimated that 1.4m policyholders will each received several hundreds of pounds of compensation. However, Which? believes that they are entitled to over £2K.

Doug Taylor at Which is quoted in The Times as saying:

"The fair solution would be to give 90% to policyholders and 10% to shareholders, even if this is not Norwich Union's preferred result."

Patrick Connolly at JS&P Towry Law, said:

"Norwich Union doesn't want to release the funds to benefit policyholders but because it wants to use them to support the business and boost shareholders' profits."

Prudential also wants to pass on £9BN billion from the inherited estate to shareholders.

These moves are expected to encourage other insurers to do the same, in order to prop up their share prices and to keep the shareholders quiet and subservient.

David Riddington, a senior actuary for Norwich Union, said:

"The inherited estate is legally owned by the company and its shareholders, so policyholders don't have any rights as such. Payments to customers are likely to be comparatively modest."

Ian Allison at Brunel Franklin, said:

"We are astonished that Norwich Union sees fit to attribute some of its surplus to shareholders while many endowment victims' finances remain in tatters."

Clare Spottiswoode has been appointed as "policyholder advocate", by Norwich.

The Policyholder Advocate is the representative for all the eligible with-profits policyholders of a company that is considering a reattribution of inherited estates.

The Policyholder Advocate's key job is to negotiate the size of any incentive to withy-profits policyholders to give up their rights to any possible future distribution from the inherited estate.

Details about Spottiswoode can be found on the website

The outcome of these two moves will impact the rest of the industry, and the finances of the long suffering endowment policy holders.

Friday, January 12, 2007

Norwich Issues Red Alert

Norwich Issues Red Alert

Norwich Union has given its hapless endowment policy holders an unwelcome New Year present, by categorising nearly 90% of its 750,000 mortgage endowments as being in the "Red" category.

The red alert means that policyholders need to take urgent action, to avoid shortfalls on their home loans.

Norwich Union stated that 89.5% of endowment holders had been placed in the 'red' category, this is a staggering rise of 72% from last year.

Last year Norwich Union categorised 7% of its endowment policyholders as green and 21% amber.

David Riddington, senior actuary for Norwich Union, said:

"We didn't think amber was adding a lot. What we want, and what the FSA wants, is if people aren't on green, they should really think about the position they're in and decide whether to take action.

What happened with the amber is it perhaps lulled people into not doing anything, so this is a way to get people to at least sit up and take notice

A fair and honest point, in my view, which in effect makes a mockery of the FSA's three coloured traffic light system.

The average shortfall projected by Norwich Union for 2007 is £1,400.

As I keep repeating, all of this heartache, wasted time and money could be avoided if the life assurance industry "bit the bullet" and underwrote these useless underperforming products.

Thursday, January 11, 2007

The Manx Black Hole

The Manx Black Hole

Those of you in the UK with underperforming endowment mortgages, who feel that they have been given the wrong end of a very unpleasant stick, should spare a thought for those endowment mortgage holders resident in the Isle of Man.

Reports from the Isle of Man indicate that there is a legislative black hole there, relating to the mis-selling of investment products.

A discrepancy in legislation has been highlighted, which means that the Manx ombudsman's power only applies to policies sold after April 20 1999, some 11 years later than the UK.

What a mess!