The Endowment Diary

The Endowment Diary


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

Thursday, July 31, 2008

The £1BN Payoff

The Times reports that long suffering Norwich Union endowment policyholders have been offered £1BN of its with-profits fund.

Aviva, the owner of Norwich Union, will offer about 700,000 policyholders between £400 and £1,000 in exchange for foregoing their right to future bonus payments. A further 220,000 will receive up to about £3,500 and a handful of long-term investors will collect several thousand pounds more.

Clare Spottiswoode, the policyholder advocate, is well pleased and describes the result as a "triple-whammy winner" for the policyholders.

Tuesday, July 29, 2008

Public Censure

Public Censure

The Financial Services Authority (FSA) has publicly censured Mandrake Associates Limited (MAL) for serious failings in the way it handled mortgage endowment complaints.

The FSA has also prohibited William John Pirie, the firm's sole director, from carrying out any customer functions in regulated financial services due to his mishandling of endowment mortgage complaints received by MAL.

The FSA claimed that as a result of MAL's failings, there was an enhanced risk that endowment mis-selling complaints were either wrongly rejected or delayed.

MAL was found to have failed to ensure its complaints handling procedures were operating effectively, failed to provide adequate resources for the handling of mortgage endowment complaints and failed to ensure that complaint handling personnel were trained to carry out fair investigations.

In addition it failed to finalise the complaints that were dealt with, within a reasonable time and failed to provide complainants with updates about the progress of investigation in a timely fashion, while it also failed to co-operate fully and promptly with the directions of the Financial Ombudsman Service.

Margaret Cole, director of enforcement at the FSA, said:

"Firms must have in place and operate an effective complaints handling system as a key part of treating customers fairly. MAL's endowment complaints handling failings were systemic, lasting for four years and meant consumers who had been mis-sold endowments were at risk of not receiving compensation at all or only after long delay.

Firms who fail their customers in this way will face enforcement action. MAL would have faced a fine of £400,000 if it had not been for its current financial position

Monday, July 28, 2008

The £1BN Payout

The £1BN Payout

The Financial Services Compensation Scheme (FSCS) reported that over £1BN of compensation has been paid out to consumers who lost money due to the collapse of financial services firms over the past seven years.

The FSCS was set up in 2001, and has paid out £1.04BN since inception. However, out of the 16,490 new claims, the majority (7,410) still relate to mortgage endowments. The hapless claimants having bought the useless product from a firm that had collapsed before they received their compensation for mis-selling.

The average payout was £1,800 each.

Monday, July 21, 2008

Friends Provident Cuts Bonuses

Friends Provident Cuts Bonuses

Those long suffering endowment policy holders who have polices managed by Friends Provident will have been disappointed to learn that it will be slashing the final bonuses it pays to long-term savers.

Friends Provident state that the value of its with-profits fund fell by more than 7% during the first half of the year.

Whilst annual bonuses are being maintained, the final bonuses are being cut. Those in the main with-profits fund are being more than halved.

A policyholder with a 15 year unitised pension plan in the main fund will receive a regular bonus of 4%, but their final bonus will be cut from 18.7% if the policy had matured in January to just 2.1% now.

Those with a 25 year policy will be paid a final bonus of 17.5%, a massive reduction from the original 40% in January.

The ongoing credit crisis and recent falls in the stock market are being blamed. All very well, but what about the previous years when the stock market was booming?

A lousy result for those who have spent years investing in these policies.

Monday, July 14, 2008

Equitable Life

Equitable Life

The long suffering, and shockingly mistreated, investors in Equitable Life may be slightly cheered by a report in today's Telegraph that says:

"Prudential, Legal & General and Swiss Re are among a pack of insurance giants circling Equitable Life, Britain's oldest mutual insurer.

Equitable has drawn up a shortlist of bidders for the remnants of the former insurance leader, which at its peak was worth £26bn and had 1.5m policyholders.

News of prospective bids for the business comes ahead of this week's publication of a damning report by Ann Abraham, the Parliamentary Ombudsman, who will criticise the Government for its failure to regulate the society properly in the lead-up to its near collapse

The purchase, if it comes, will take some time. Therefore, whilst the investors are waiting for the outcome of that, they should mount a class action against the government for its maladministration of one of the biggest scandals to shake Britain's financial services industry.

Monday, July 07, 2008

Without Profits

Without Profits

Those hapless with profits endowment policy holders have good reason to make a claim against the life assurance companies for false description of their products. The recent poor results from these companies show that these policies should be refereed to as "without profits".

Money Management magazine has identified a number of "stellar" under performers:
  • Monthly premiums of £50 paid into a London Life with profits endowment for the past 10 years (ie £6000) would have a generated a payout of £5,544. Why not just set fire to your money instead?

    Other 10 year policies paying out less than was paid in include Equitable Life, Pearl and Royal Life.

  • In 1998, the average 25 year endowment policy paid £105,540 on a £50 per month premium. In 2003, the average payout was £65,776. Now the average 25 year policy pays out £45,330.

  • Thirty five insurers are paying lower payouts on 25 year policies compared with this time last year.
With profits is a misleading term, many of the life assurance companies should be sued for misleading their hapless customers.