The Endowment Diary

The Endowment Diary


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

Thursday, June 30, 2005

Endowment Complaints Quadruple

Endowment Complaints Quadruple

The number of claims being made by people who hold useless and underperforming endowment policies, has risen dramatically.

The Financial Ombudsman Service (FOS) has said that it received 70,000 new complaints about endowment mortgages last year.

That is four times as many as it received three years ago.

The FOS expect that the level of complaints will increase; as people received re-projection letters, which will warn them that their policies are going to fail.

Walter Merricks, chief ombudsman, is quoted as saying:

"The number [of disputes] we can expect to receive in the current year will largely be determined by how financial services firms meet the new regulatory requirements on so-called re-projection letters."

The FOS noted that the Financial Services Authority (FSA) had found evidence of serious shortcomings, by some firms, in the handling of endowment complaints.

As noted before, people should be going to jail for this.

Wednesday, June 29, 2005

Norwich Union Raises Bonuses

Norwich Union Raises Bonuses

In a rare piece of good news, for some of those holding endowment policies, Norwich Union has announced that it will be raising bonuses on some of its with profits endowment policies.

This will be the first increase since 1991, that fact alone shows just how badly endowment policies have been performing.

As noted many times before; why were these polices, when they were obviously failing, still sold by the life assurance companies?

Norwich Union said that it had decided to raise the rates paid on certain with profits policies in the CGNU (which includes General Accident) and CULAC (Commercial Union) funds, on those with profits policies taken out before October 1998.

The bonus rates will be increased from 1% to 2% in the CGNU fund, and people in the CULAC fund will be paid 1.5% compared with 0.5% previously.

Norwich said all other bonus rates would remain unchanged, and that there would be no changes to the value of maturity payouts or the current levels of "market value reduction".

Monday, June 27, 2005

Scottish Test Case

Scottish Test Case

The Herald reports that a Glasgow financial advisory firm is planning a legal test case, on behalf of nearly 100 clients allegedly mis-sold endowment policies by Scottish solicitors.

Macarthur Denton Asset Management accused lawyers of a "disgraceful" failure to fulfill their professional responsibilities, alleging that they have "collectively shrugged their shoulders" when pressed for compensation.

I personally believe that the best way forward, for the 8 million of us who hold these useless and underperforming policies, is for there to be a class action.

Monday, June 20, 2005

Closed Funds

Closed Funds

Many endowment policy owners hold policies in closed funds, around £160BN is tied up in these funds.

Closed funds are funds that are closed to new business.

These funds, because they are closed, do not have the same incentive to try to show a good return on their funds and thus attract new investors.

Policy holders are faced with the dilemma of choosing between staying with the fund or exiting, and thus incurring exit penalties.

The Telegraph discussed these issues in a recent article. You can read it via this link Closed Funds.

Tuesday, June 14, 2005

Standard Life "Merely Following Orders"

Standard Life "Merely Following Orders"

It seems that Standard Life is getting rather a rough press these days, over its endowment policies.

Standard Life is now facing calls to compensate up to 100,000 mortgage endowment holders, for failing to disclose the full extent of charges levied on their endowment policies.

The hapless holders of their Homeplan policies are now facing 12% shortfall on their policies, because of a charging discrepancy.

Which? is leading the calls to compensate victims of this debacle; other companies (Norwich Union, L&G, Scottish Widows and Axa) which sold policies, with similar charging structures, have topped up their own clients' investments.

Standard Life used "standard charge projections", specified by the regulator, to calculate its premiums. However, the actual charges were up to 10% higher.

Standard Life claim that they have done nothing wrong.

A spokesman said that they were merely following industry guidelines at the time.

Doesn't that, "merely following orders", have a familiar ring to it?

Friday, June 10, 2005

FT Article

FT Article

My thanks to Ben for forwarding me this article, that appeared in the FT on the 7th of May.

"The most successful blogs appear to be first and foremost exercises in 'personal branding'. One such blogger is self-styled 'living brand' Ken Frost, who has a huge personal blog and an equally lengthy one (some 205 pages) detailing every twist and turn of the mis-sold endowments debacle and his claim for compensation."

Monday, June 06, 2005

Standards Life's Endowment Debacle

Standard Life's Endowment Debacle

Further to my earlier article about Standard Life's failing Homeplan endowment policy, it seems that the shortfalls on this useless product will be more than previously thought.

It seems that the value of many of the company's Homeplan policies, sold in the early 1990s, could be as much as 12% lower than the amount originally estimated.

It is estimated that the losses could exceed £250M.

The reason?

Standard Life set its premiums at an artificially low level in order to attract new business.

Standard Life are continuing to reject demands that the company compensate those who face shortfalls.

Well they would, wouldn't they?

A Standard Life are quoted as saying:

"At the time it was launched, Homeplan was an innovative and popular product. The innovative flexibility offered by Homeplan meant it was an immediate success and helped tens of thousands of people onto the property ladder."

Not much comfort to those facing a shortfall now though is it?

As I have repeated, time and time again, what is the point of an endowment policy if it is not going to pay off the mortgage?

People would not have taken these useless policies out if they didn't think that they would work.

In other words, it is the duty of the life assurance companies to underwrite these policies.

Standard Life are keen to blame the independent financial advisers (IFAS) for their mess. They are reportedly saying that the way the product was designed meant that IFAS, who were responsible for selling Homeplan policies at the time, could themselves decide the level of premiums that their clients should pay.

Janet Walford, editor of Money Management, politely says that this is of course bollocks:

"This just does not seem logical to me. Life offices price their policies on complex actuarial assumptions, including underwriting risk, assumed performance and charges. How would an IFA know what to charge? It's madness."

Other life insurers, have realised the error of their ways and have quietly paid compensation to their policyholders in a similar position.

The list of recalcitrants includes; Scottish Widows, Axa, Clerical Medical, Legal & General, Norwich Union and Canada Life.