The Endowment Diary

The Endowment Diary


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

Thursday, November 24, 2005

Never Ending Debt

Never Ending Debt

According to the Office for National Statistics, approximately 600,000 people over 65 still have a mortgage. This figure means that 10% of pensioners are still paying mortgages.

Apparently many pensioners are remortgaging, at expensive rates, because of a shortfall on their endowment mortgages.

It seems that a lifetime of debt is what many owners of these useless policies have to look forward to.

Wednesday, November 16, 2005

Compensation Shortfall

Compensation Shortfall

The Financial Services Compensation Scheme (FSCS) has said that its budget of 7000 endowment claims for 2005 is massively below reality, the actual level in fact is more likely to be 22000.

This means that it will face a shortfall in 2006.

The compensation scheme is funded through contributions from financial services companies, and is available to those who have endowment policies sold to them by IFA's that have subsequently gone bust.

This is the second year in succession that the scheme has underestimated the number of claims. In 2004 it had to ask the investment industry for an extra £15M, to cover compensation above the original budget of £33M.

It seems that not all the "collapses" of IFA's are as clear cut, as one might expect in an industry that is meant to domonstrate probity and integrity.

Berry Birch & Noble Financial Services ceased trading last year, and its assets were transferred to the almost identically named Berry Birch & Noble Financial Planning.

The firm's liabilities, including any compensation due to investors mis-sold products such as high risk income bonds, have been left with the defunct firm. This means that the FSCS have to pick up the "tab".

Loretta Minghella, FSCS chief executive, said:

"New endowment claims have been received at unprecedented levels, way beyond our expectations. As ever the challenge for FSCS is to strike the right balance between providing an efficient and timely service to consumers with our responsibility to the industry to keep costs under control."

I don't know why they are so surprised at the level of claims, these endowment products simply do not work.

The best solution would be for the life assurance industry to underwrite these worthless, useless, products.

Monday, November 14, 2005

The Price of Justice

The Price of Justice

It is reported that Paul Flynn, a Labour MP, has agreed to pay approximately £36K by way of settlement of a libel action brought against him by Endowment Justice.

Endowment Justice are a complaints handling firm, that specialise in endowment mortgages.

Mr Flynn's solicitor said that the MP was retracting allegations he had made against Endowment Justice.

Endowment Justice launched legal proceedings against Mr Flynn this year, after he criticised the complaints handling firms that work for endowment mis-selling victims.

Although Endowment Justice had held talks in the past with Mr Flynn over its concerns about bad practices at several complaints handling firms, Flynn then went on to name Endowment Justice in accusations he made about the whole sector.

Monday, November 07, 2005

98% To Experience Endowment Shortfall

98% To Experience Endowment Shortfall

The Times reports that Ned Cazalet, of Cazalet Consulting the independent analyst, predicts that about 98% of the 2.7M households with endowment mortgages will suffer a shortfall.

He believes that many companies are still understating the size of the problem, because they are basing projections on an "unrealistic" 6% growth rate.

He notes that the life assurance companies "make a thing of the fact that many policies maturing today are on target, but these policies are only a handful of the total..".


That's a lot of very unhappy people.

Surely that's a large enough number of people, to make it worthwhile to get together in a class action against the life assurance companies?

Tuesday, November 01, 2005

Standard Life Demutualisation

Standard Life Demutualisation

Those of you with endowment policies in Standard Life, may find this article in This Is Money to be of interest.

It explains the effects that the proposed demutualisation of Standard Life may have on endowment policies.