The Endowment Diary

The Endowment Diary

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

Friday, November 07, 2003

I received a reply today from the Ombudsman, in response to my letter dated 28 September (see post 29 September).

In brief, the key points are:

 They apologise for taking so long to respond, and assure me that everything that I have told them has been considered.

 The six week gap, in 1991, between enquiring about the policy and completing the paperwork could have been used for considering the policy (rather than, as it was, being used to negotiate a purchase price reduction for my new apartment).

 The fact that the investment attitude section of A’s application form was not completed does not constitute a mis-sale.

 The fixed mortgage I took out precluded me from using a repayment mortgage; therefore I had to have an endowment.

 They acknowledge that I did indeed make a complaint to them about the first endowment policy I took out. However, as this was before April 1988 there is nothing they can do. Note, their original argument was that they had no record of me complaining to them about the first policy; and so they questioned why I was complaining about the second policy. They have ignored their error, and hidden behind the fact that they do not handle claims pre April 1988.

 They note that, in their mortgage questionnaire, I have assessed my attitude to risk (on a scale of 1-10) as 2-cautious. They consider this to be not “entirely risk averse”; therefore the sale of an endowment is justified (in other words only those who score 1 can complain; a bizarre method of rating, why offer such a wide range of 1-10? Tip to all of you filling these in, score yourselves as 1).

 They repeat the fact that my current modest portfolio of shares, is indicative of my risk attitude in 1991; when I didn’t hold these shares. They also note that in 1991 I held the princely sum of £900 of shares, this indicates that I am prepared to risk my money. To compare my current investment and risk attitude, with my investment and risk attitude of 12 or more years ago is akin to comparing apples to bananas; it is not a valid line of reasoning.

 They have carefully considered the wording of A’s brochure, and note that it is positively worded (the word “assured” appears in the brochure, I would say that is more than just “positive”). They do not consider that it constitutes a guarantee.

 They will not uphold my complaint.

 I will need to provide new evidence/arguments for their opinion to change.

I note that the following paragraphs from my letter of September have been entirely ignored:

“..In conclusion, there would be little point (for any rational individual) in taking out an endowment policy if it were not going to pay off the mortgage.

L&G marketed these polices like cars and TV’s; ie a product with a defined function, namely, to pay off the mortgage. L&G by selling them as a product with a defined function, not as an investment, have by definition mis-sold them. The policy has been shown to be not “fit for purpose” as it will not cover the mortgage; and as with any product, not “fit for purpose”, the supplier should compensate the consumer for defects in manufacture….”

As entertaining as it may be to exchange a further series of letters rebutting their points, akin to a protracted game of tennis, it is clear to me that I can go no further with the Ombudsman service. Therefore having exhausted all routes that I can take by myself, it is time (as Mr Burns of Simpsons fame would say) to “release the hounds”.

I will place this case in the hands of the agency who are handling my other complaint; let’s see if they can get further.


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