To return to my main website please click on the logo below, or navigate the site using the menu:
Here I present a public record of my progress (or lack of it) in claiming financial redress for the mis-selling of two endowment policies.
I will also keep you up to date with the latest developments in the endowment mortgage mis-selling scandal.
During the eighties, endowment mortgages were the popular method of financing a mortgage. Some 8 million people in the
UK now own an endowment policy. It is expected that the majority of these policies will fail to pay off the mortgage debt.
The latest estimate is that there will be a £40BN shortfall. However, I suspect that this will top £100BN.
The endowment policy mis-selling scandal is one of the worst
financial scandals to hit the UK.
Endowment policy holders, and home owners, are going to end up paying the price for the mis-selling of these products by the "professionals".
Please feel free to share your worries, and experiences of trying to claim compensation, on The Forum
Petition Launched
I have launched a petition asking for the issues in respect of the mis-selling of endowment policies to be treated under the remit of consumer
legislation, rather than under the remit of the FSA.
About Me Name:Ken Frost MA FCA FIPFM Location:UK Positions Held:Company Directorships Phoenix Commercial Ventures Ltd
Hana Electronics JVC
To see my resume visit Resume
This week's Queen's Speech has raised the possibility of hapless endowment policy holders being able to mount class actions against the life assurance industry.
The government proposes to give consumers the right, for the first time, to take "class action" suits through the courts in cases of large-scale wrongdoing such as endowment mis-selling or personal pensions.
This is something that I have been calling for over many years. Not only has the financial services industry mis-sold these flawed and badly designed products, but they have mismanagement them (despite awarding themselves very generous "management" fees and commissions).
The consumer will not only has grounds for suing wrt mis-selling, but also has grounds based on the fact that the products are not fit for purpose (ie they did not pay off the mortgage, which is what they were meant to do).
Why buy the product if it wasn't going to work?
Unfortunately, there is little chance of this becoming law this side of the election.
"800,000 policyholders of with-profits funds run by Aviva, Britain’s largest insurer, will share less than half of the billion-pound windfall promised just over 18 months ago.
The investors had been pledged £1 billion in February last year when the funds were valued at £4.2 billion, but were told this March that the payout would be £500 million because falling gilt, bond and property prices had reduced the funds to £1.2 billion.
The High Court yesterday upheld Aviva’s decision to pay the £500 million because the fund had shrunk in value. Aviva will keep £700 million for its own use.
Eligible policyholders — those with Commercial Union Life, CGNU Life and Norwich Union Life with-profits funds — will receive between £200 and £1,150. Aviva said it would put the scheme into effect on October 1, with the majority of payments being made before the end of the year."
Why has the FSA sat on its hands and allowed Aviva to take (Which? uses the word "plunder") £700M of policyholders' money?
Some also argue that Aviva have deliberately dragged this out; so as to not to have to pay out so much money, as the markets continued to fall.
Policyholders, yet again, have been ill served by a life assurance company.
As I have noted many times on this site, at some stage the hapless millions who were conned into buying useless, underperforming endowment mortgages will have to cover the shortfall when the policy matures.
The penny may finally be dropping, wrt paying off uncovered debt, as The Times reports that people are waking up to the problems of paying off interest only deals (an offshoot of endowments).
"Figures from the Financial Services Authority, which has regulated mortgages since 2004, show that 38 per cent of Britain's 11.1 million mortgage borrowers — or more than one in three — may have made inadequate provision to pay off their capital sum.
Many are in negative equity and the savings products taken out to cover the capital repayments have fallen short. That 38 per cent figure does not include those with endowments or buy-to-let investors who took out interest-only mortgages to keep the cost down."
These policies are beginning ot mature at the very time the property market/economy is struggling to pull itself out of the mire.
The hopeless and hapless FSA has now published its final decision on its endowment mis-selling consultation, and has ignored consumer concerns about the proposals.
Which? describe this as "an unbelievable betrayal of consumers".
Which? goes on to note that the FSA had 234 responses to their consultation. Only 10 responses were from firms and industry bodies. Despite this, the FSA only addressed the concerns of firms who felt that the proposals go too far.
Which? quite rightly states that the FSA is allowing the financial services industry to dictate policy once again; get away with ripping off the consumer.
The FSA will not be missed when it is abolished after the next election. It has been worse than worthless in its role as consumer "champion", and serves only the needs of its paymasters in the financial services industry.
Those of you who hung onto a flimsy straw of hope that the recent rebound in the FTSE may help draw a line under your collapsing "with profits" (such a misnomer for such a lousy product) endowment policy, need to read this article in The Times.
The bottom line is that the returns will worsen, and that the life assurance companies will continue to cut bonuses.
Either way, in good times or bad, the policy holder picks up the bill for the failures of these useless products and the conmen who sold them to you.
We need a class action to bring these companies to heel!
The Telegraph reports that a computer error by Aviva, has resulted in the miscalculation of Aviva's orphan asset payout to 9,000 policyholders.
One million policy holders were contacted in May, wrt the terms of distribution for Aviva's £1.4BN inherited estate.
Aviva was then forced to send another letter to 9,000 policyholders, to tell them of a "technical error" that resulted in them being offered the wrong amount.
This Is Money reports that a staggering 99% of endowment policies will fail to pay off the mortgages which they were designed to cover.
With over 4.3M policies still in force this means that millions of people will be affected by the failure of these useless products.
The FSA and the life assurance companies that "manage" these failed products continue to hide behind the excuse that, as they are investments, the consumer knowingly accepted the risk that they might not cover the mortgage.
This excuse is not valid, as the life assurance companies told the hapless consumer that they were designed to pay off their mortgages. Why else would anyone have bought these products if they were not going to fulfil their primary function of paying off a mortgage?
The fact 99% of them will fail to do this is proof that the product was poorly designed, and continues to be atrociously "managed" (eg why do life assurance companies continue to milk the policies of commissions, when they have demonstrably failed?).
The consumer has been ripped off by the life assurance industry, and left to rot by the FSA.
Any hope of naming and shaming the Lautro 19 is now "dead and buried", according to former IFA Defence Union chief Evan Owen.
The Information Commissioner's office has stated that the High Court has ruled that the information falls under absolute exemption rules under the Freedom of Information Act, and therefore does not have to be disclosed.
The Information Commission ruled in August 2007 that the FSA had to name the mortgage endowment providers which misused Lautro projections in setting premiums, which lead to clients being given unrealistically high maturity figures (cynics might say that they were conned).
The hapless FSA, ever keen to protect the financial services industry from the consumer, appealed against the decision. In October 2008 the Information Tribunal rejected the FSA's appeal.
The FSA then took the appeal to the High Court, which upheld the appeal.
If only the FSA were as zealous when protecting the consumer!
TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute. The Policy has been designed to combat the costs and inequities of undergoing the ever-increasing number of HM Revenue & Customs random investigations.
The standard cover provides representation costs by registered accounting practices on your behalf, for up to £75,000 in any one claim, arising from:
-Income Tax Self Assessment full enquiries -Income Tax Self Assessment aspect enquiries (if this option is selected) -Corporation Tax Self Assessment full enquiries -Corporation Tax Self Assessment aspect enquiries (if this option is selected) -H M Revenue & Customs VAT disputes -Employer compliance disputes PAYE/ P11D/ NIC -IR35 disputes -Now covers business's with an annual turnover of up to £10 million
The FT is suitably scathing about the FSA decision to kowtow to the insurance industry wrt compensation payments for mis-selling endowment policies.
"So FSA has bottled it once again. Faced with pressure from the insurance industry, they have backed away from fully enforcing a ban on using policyholders' money to mis-selling bills.
The decision appeared in document CP 09/09: "Proprietary firms will no longer be able to pay compensation and redress payments from their with-profits funds, where they arise out of events that occur after the rule takes effect. The position in relation to events prior to the effective date will be unchanged."
So any compensation or redress from new mis-selling cannot come from the with profits fund, but for all past misdemeanours they can still raid policyholders' cash.
The Financial Services Consumer Panel describes this as a "backward step" and says that "having uncovered unfairness, the FSA should resolve it".
Predictably, the FSA has allowed intense lobbying from the powerful insurance industry to override consumer fairness. Reading through the comments from respondents in this consultation paper illustrates how many insurance companies are still living in the dark ages.
Some argued that policyholders have no interest or rights in any inherited estate that might exist in with profits funds. Others referred to previous consultation papers without appearing to have noticed that these have been overtaken by clarifications and later statements.
So once again the dinosaurs have outwitted the FSA and consumers will be left to pick up the bill as insurers continue to raid their savings to pay mis-selling bills."
Which? have launched a campaign to lobby the FSA to change its decision re allowing life assurance companies to charge compensation costs for mis-selling endowment policies against inherited estate.
Prudential has taken a staggering £1.6BN from the inherited estate to pay mis-selling costs, while Norwich Union (Aviva) has taken £202M and earmarked another £64M for future claims.
Which? thinks it is outrageous that firms can avoid paying the penalty for their mistakes. The FSA seemed to agree that they should change the rules but have gone back on their original proposals. Now the FSA say that they will only stop firms from charging for mis-selling on policies sold from July this year.
This new rule will be almost meaningless, as hardly any new policies are being sold and firms will be still be able to avoid paying the cost of any new cases that emerge of past mis-selling.
Which? have created template letters which can be completed and sent to MPs and the FSA in less than 2 minutes. They can be accessed via this link Which?
"It is a fair bet that any new offer will be lower, and that Norwich Union will seek ways to delay payment to their policyholders."
The policyholders in two with-profits funds are now being offered £500M of the firm's "inherited estate".
How ironic that Aviva took time out during a rapidly falling market to revise its offer. Cynics might argue that the timing was deliberate, thus ensuring that any payout offered would be reduced.
The High Court will take at least a month to decide as to whether to rule in favour of the FSA's appeal to avoid naming the Lautro 19.
The FSA presented new evidence this Monday, which focused on the FSA's argument that confidential information received by the FSA must not be disclosed without consent.
This relates to a Freedom of Information request by IFA Defence Union chairman Evan Owen in January 2005. The Information Commissioner ruled in August 2007 that the FSA had to name the endowment mortgage providers which misused Lautro projections in setting premiums.
