The Endowment Diary

The Endowment Diary


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

Tuesday, March 29, 2005

Sweeping It Under The Carpet

Sweeping It Under The Carpet

Walter Merricks, chief of the Financial Ombudsman Service (FOS), is reported to have said that complaints about mis-sold mortgage endowments occupy most of his time.

They received 70000 last year.

He is predicting that this level of complaints will continue at least for another 18 months. However, they will then decline as the FSA six month time limit for complaints kicks in.

Some cynics might argue that this time limit was the FSA's method of getting the life assurance companies off the hook, in respect of their obligations to provide a product that actually works.

I have a feeling that this problem will not so easily be swept under the carpet.

Wednesday, March 23, 2005

Abbey's Curate's Easter Egg

Abbey's Curate's Easter Egg

Abbey has presented its with profits policy holders with something of a curate's egg for Easter.

Despite benefiting from improved investment performance on with profits funds, Abbey will pay no annual bonuses on Scottish Provident, Abbey National Life and Scottish Mutual policies.

How nice of them!

However, they are going to reduce Market Value Reductions (MVR's), the penalties for early surrender, for some policyholders and reintroduce terminal bonuses on some long-term policies.

Abbey's Scottish Provident fund had a return of 10.5% last year, with Abbey National Life and Scottish Mutual showing 9.5% for the same period.

MVR's have been reduced by 6%. As noted, there are no annual bonuses declared for 2004, except where the policies carry guaranteed bonuses.

Scottish Mutual's traditional 25 year maturing endowments now pay a terminal bonus of 30%, an increase of 5%. The 15 year policies now receive a 5% terminal bonus, no change on the previous period.

Abbey National Life 10 year pension plans receive a 5% terminal bonus, introduced for single premium policies, and 1% for regular premiums. Scottish Provident?s 20 year endowment terminal bonus goes up from 0% to 7%.

These "improvements" are on the backs of large cuts in the past. So don't bother getting the champagne out!

At this rate, if MVR's continue to decline, investors will at least be able to take their money out and put it somewhere more useful instead.

At the end of the day endowment policy holders are being screwed left, right and centre!

Friday, March 18, 2005

Another Nail In The Endowment Coffin

Another Nail In The Endowment Coffin

Gordon Brown has managed to bang another nail into the endowment coffin, by adding a new tax on with profits funds.

If this tax is implemented, it will reduce the sums of money available to pay bonuses on with-profits policies.

In other words the already useless endowment policies will be further undermined, and pay out even less money to the hapless holders of these policies.

Gary Withers, chief executive of Norwich Union Life, is reported to have said:

"As we said to the Treasury in December, this is simply a piggy bank raid on the funds that support our customers' savings policies. One of the most effective ways to destroy confidence in savings is to introduce arbitrary tax raids on savings vehicles. We will continue to oppose this stealth tax in the interests of protecting our customers. I would again urge the Treasury to review their proposals in order to promote confidence in long term savings."

Brown started his assault on Britain's savings, when he made a £5BN a year charge on pension funds in 1997.

The new tax will lead to an increase in the tax burden on the free reserves supporting with-profits policyholders' funds.

Peter Vipond, head of financial regulation and taxation at the ABI, is quoted as saying:

"We remain very concerned about the government's intentions in this area. This proposal would represent a significant extra charge on with-profits policyholders and contradict the government's desire to encourage more saving in Britain...We are currently in detailed discussions with the government and negotiations have not concluded. We are determined to do all we can to prevent a rise in taxation on these savings products..".

Up until now, life companies have paid a 20% tax on life fund surpluses and no tax at all on pension fund surpluses. The chancellor is proposing to impose a 30% tax on both these surpluses, which means that there will be less money available to pay bonuses to policyholders.

The bottom line is that we, endowment policy holders, are screwed!

Saturday, March 12, 2005

Comment On FSA Procedures

Comment On FSA Procedures

The Financial Services Authority (FSA) has asked the City to comment on its review of enforcement procedures, specifically it has asked as to whether its regulatory decisions committee is the "right model" for making contentious decisions.

The committee's Chairman, Christopher Fitzgerald, was forced to resign following him being seen talking with a lawyer who was sitting on a panel hearing an appeal against one of its decisions.

The FSA has put out a series of questions about its enforcement process, but indicated that it will not ask for changes in the legislation that sets the terms under which it operates.

The FSA was forced to review its procedures, after the financial services markets tribunal ruled against its £1.1m fine on Legal & General for endowment mis-selling could not be justified.

Thursday, March 03, 2005

A Nice Little Earner

A Nice Little Earner

It is reported that Andy Hornby, head of the branch business of the banking group HBOS, is to receive shares worth £2.2m; after reaching targets to boost profits in the bank's Halifax and Bank of Scotland network.

The 38 year old former supermarket executive was offered the shares under a package designed to prevent him becoming chief executive of the troubled chemist chain Boots two years ago.

Thsi despite tha fact that profits have been hit by a £130m provision, to cover claims for endowment misselling.

How nice.