The Endowment Diary

The Endowment Diary


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

Thursday, December 05, 2002

Extract of letter sent to the FT today:


It is encouraging to see the FSA take some action against one of the firms accused of mis-selling endowments. However, I disagree with Sir Howard Davies’s comments as per today’s FT; that it would be wrong to foster a regime that compensated people for investments not performing as people would like.

Endowments, when they were proactively marketed in the 1980’s and 1990’s, were treated by the mortgage and life assurance industry as products not investments; no different from a television or a car. They were, as the industry had us believe, designed to pay off the mortgage and provide a tax free surplus at the end of the term.

I am keeping an on line diary of my progress in obtaining redress against two companies who mis-sold me two policies; on my website under the section The Endowment Diary. As is clear from the feedback that I have received; the consumer bought endowments as products, not investments, and took the companies at their word with regard the expected performance of these products.

Therefore, since they were marketed as products, they should be covered by consumer legislation. When you buy a car, designed to take you from A to B, and it irrecoverably breaks down (ie it was not of merchantable quality or “fit for purpose”); you take it back and obtain a replacement that works. The same principle of “fit for purpose” applies to endowments.

It is clear that they have proven to be “not fit for purpose”. Therefore, in my opinion, the basic principles of consumer legislation apply; and the relevant life assurance companies should underwrite the policies, and pay the shortfall between mortgage debt and endowment yield at the end of the term..."

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