Legal & General U Turn
Legal & General have announced that they will tell over 600,000 endowment policyholders that they have only six more months to claim compensation, if they believe they were mis-sold the products.
Up until now, L&G now had been one of the few large endowment policy providers to rule out "time-barring" customers.
L&G has started to send out letters to their policy holders this week, covering the new time bar rule and informing the policy holders about their projected returns/shortfalls on polices.
Only Prudential and Nationwide Building Society are keeping an open commitment to consider complaints.
The clock is ticking.
Thursday, March 23, 2006
Tuesday, March 21, 2006
The Dangers of Interest Only Mortgages
The Dangers of Interest Only Mortgages
The Times has a good article about the dangers of interest only mortgages, I recommend that you read it.
The Times has a good article about the dangers of interest only mortgages, I recommend that you read it.
Wednesday, March 08, 2006
The Danger of False Hope
The Danger of False Hope
Ivan Lewis, Treasury economic secretary, has warned that the thousands of Scots who were mis-sold endowment mortgages by solicitors should not hold out "false hope" of obtaining compensation.
Lewis admitted that it was a scandal that a legal loophole prevented those, who bought a policy through a lawyer before 2001, from seeking financial redress in the event of a shortfall
He is quoted as saying:
"One of the difficulties (with a new financial safety net) is it's not retrospective. I do have great sympathy for people who have been caught out by endowment mis-selling in Scotland but there is a genuine problem."
Scots who bought policies from solicitors before December 1 2001, when the Financial Services and Markets Act came into effect, do not qualify for a deal from the Financial Ombudsman Service.
The solution is for the life assurance companies, that manage these useless policies, to underwrite them.
Ivan Lewis, Treasury economic secretary, has warned that the thousands of Scots who were mis-sold endowment mortgages by solicitors should not hold out "false hope" of obtaining compensation.
Lewis admitted that it was a scandal that a legal loophole prevented those, who bought a policy through a lawyer before 2001, from seeking financial redress in the event of a shortfall
He is quoted as saying:
"One of the difficulties (with a new financial safety net) is it's not retrospective. I do have great sympathy for people who have been caught out by endowment mis-selling in Scotland but there is a genuine problem."
Scots who bought policies from solicitors before December 1 2001, when the Financial Services and Markets Act came into effect, do not qualify for a deal from the Financial Ombudsman Service.
The solution is for the life assurance companies, that manage these useless policies, to underwrite them.
Friday, March 03, 2006
HBOS Hit By Endowment Losses
HBOS Hit By Endowment Losses
HBOS has announced that it made £4.81BN in pretax profits last year.
However, owing to the endowment scandal it had to take a £260M provision for endowment mis-selling.
HBOS has announced that it made £4.81BN in pretax profits last year.
However, owing to the endowment scandal it had to take a £260M provision for endowment mis-selling.
Thursday, March 02, 2006
Lloyds Endowment Hit
Lloyds Endowment Hit
Last week Lloyds reported profits of £3.82BN for 2005.
However, the charge for compensation for paying customers for mis-selling endowment policies rose from £100m in 2004 to £150m in 2005.
Whilst this cost affects the results, and of course the shareholders, I doubt that the people who sold these underperforming and useless products will have been affected; ie the senior managers will still receive bonuses.
Last week Lloyds reported profits of £3.82BN for 2005.
However, the charge for compensation for paying customers for mis-selling endowment policies rose from £100m in 2004 to £150m in 2005.
Whilst this cost affects the results, and of course the shareholders, I doubt that the people who sold these underperforming and useless products will have been affected; ie the senior managers will still receive bonuses.
Wednesday, March 01, 2006
You Have Been Warned
You Have Been Warned
The Financial Services Authority have stated that it is standard practice for endowment providers to continue paying commissions to mortgage advisers, while policies remain active, even if the holders have paid off their mortgage.
This means that even though the endowment policy that you hold may not reach target, the person/company who sold you the mortgage will still be receiving a commission.
This of course will reduce the value of the policy.
Happy with that?
The Financial Services Authority have stated that it is standard practice for endowment providers to continue paying commissions to mortgage advisers, while policies remain active, even if the holders have paid off their mortgage.
This means that even though the endowment policy that you hold may not reach target, the person/company who sold you the mortgage will still be receiving a commission.
This of course will reduce the value of the policy.
Happy with that?
Tuesday, February 28, 2006
Legal & General Offer Good News
Legal & General Offer Good News
In a rarity for this site, I am again pleased to be able to write that a life assurance company is offering their long suffering endowment policy holders some good news.
Legal & General announced last week that their with profits fund experienced a 19% investment return during 2005. This meant that L&G could increase terminal bonuses for the majority of its 900,000 with-profits savers.
Additionally, L&G said that it had reduced the penalties policyholders had to pay if they cashed in their policy early.
The bonuses would vary from policy to policy, but people with a conventional endowment policy would receive 0.75% on their sum assured and 1.25% on bonuses they had previously been paid.
Someone with a 25-year low-cost mortgage endowment policy into which they have paid £50 a month will receive a final payout of £45,769, compared with £42,743 if the policy had matured a year earlier.
L&G claim that the strong investment returns seen during the year, were likely to reduce the number of people with endowment mortgage shortfalls.
In 2004, 55% of their policyholders were warned that their policy would not be large enough to repay their mortgage.
This "good" news from L&G, I would remind you that these policies were designed to pay off the mortgage, again calls into question the skills of some of the other life assurance companies who have announced cuts this year.
In a rarity for this site, I am again pleased to be able to write that a life assurance company is offering their long suffering endowment policy holders some good news.
Legal & General announced last week that their with profits fund experienced a 19% investment return during 2005. This meant that L&G could increase terminal bonuses for the majority of its 900,000 with-profits savers.
Additionally, L&G said that it had reduced the penalties policyholders had to pay if they cashed in their policy early.
The bonuses would vary from policy to policy, but people with a conventional endowment policy would receive 0.75% on their sum assured and 1.25% on bonuses they had previously been paid.
Someone with a 25-year low-cost mortgage endowment policy into which they have paid £50 a month will receive a final payout of £45,769, compared with £42,743 if the policy had matured a year earlier.
L&G claim that the strong investment returns seen during the year, were likely to reduce the number of people with endowment mortgage shortfalls.
In 2004, 55% of their policyholders were warned that their policy would not be large enough to repay their mortgage.
This "good" news from L&G, I would remind you that these policies were designed to pay off the mortgage, again calls into question the skills of some of the other life assurance companies who have announced cuts this year.
Wednesday, February 22, 2006
Good News From The Pru
Good News From The Pru
Those of you with endowment policies, managed by the Prudential, have something to celebrate.
They have announced a 20% return on their with-profits fund, after increasing the equity backing of the £83BN fund from 64% to 74%.
The rise of 17%, after tax, has been passed on to their customers.
Endowment policies rose by over 16%, and maturing policy pay-outs were higher than a year ago.
Ned Cazalet, an industry commentator, said that the performance was "head and shoulders above everybody else a 45% cumulative return over the last six years compared to an average of 20% for the rest".
During 2005, whilst the Pru was adding to its equity backing (equities plus property), Standard Life (for example) was reducing the equity backing of its fund from 50% to 45%.
Standard Life then went on to whine and bleat earlier this month that the reason for their dismal performance was because the FTSE-100 had fallen from 6930 six years ago. Had they been more flexible and better organised they could have taken advantage of the rising market, just as the Pru did.
Almost all of the Prudential's maturing endowments paid off their mortgages last year, and the number of "red" policies off track has dropped from 65% to 16%.
How many other endowments can claim that?
This good performance by the Pru raises some very uncomfortable issues for many of the other life assurance companies, that have been performing dismally:
Those of you with endowment policies, managed by the Prudential, have something to celebrate.
They have announced a 20% return on their with-profits fund, after increasing the equity backing of the £83BN fund from 64% to 74%.
The rise of 17%, after tax, has been passed on to their customers.
Endowment policies rose by over 16%, and maturing policy pay-outs were higher than a year ago.
Ned Cazalet, an industry commentator, said that the performance was "head and shoulders above everybody else a 45% cumulative return over the last six years compared to an average of 20% for the rest".
During 2005, whilst the Pru was adding to its equity backing (equities plus property), Standard Life (for example) was reducing the equity backing of its fund from 50% to 45%.
Standard Life then went on to whine and bleat earlier this month that the reason for their dismal performance was because the FTSE-100 had fallen from 6930 six years ago. Had they been more flexible and better organised they could have taken advantage of the rising market, just as the Pru did.
Almost all of the Prudential's maturing endowments paid off their mortgages last year, and the number of "red" policies off track has dropped from 65% to 16%.
How many other endowments can claim that?
This good performance by the Pru raises some very uncomfortable issues for many of the other life assurance companies, that have been performing dismally:
- Why have many of the others performed so badly?
- Why do they continue to blame the markets, when it is clear that it is the management of these funds that is to blame?
- Why do they continue to pay their senior staff bonuses, when their policies are failing their customers?
- Why do they make "management" charges on these failing and useless endowment policies, when they are clearly not capable of running them effectively?
Monday, February 06, 2006
Standard Life Fails To Deliver
Standard Life Fails To Deliver
More bad news for people holding useless and underperforming endowment mortages.
Standard Life have warned their 2 million with-profits customers that policies maturing this month will pay out on average 5% less than before, on comparable policies; this is despite the fact that share prices are booming.
The annual bonus rates on conventional with-profits policies are unchanged, but terminal bonuses are down.
The maturity value of a Standard Life 50 a month, 25 year mortgage endowment policy is now £40,459 this month, that is a massive fall of 18% when compared to the same policy of £49,511 in February last year.
John Gill, Standard's UK life and pensions managing director finance, is quoted as saying:
"By smoothing returns, we have protected policyholders from the full drop in asset values between 2000 and 2002."
Others are not taken in by this pr hype.
Clive Scott-Hopkins, from independent financial advisers Towry Law, is quoted as saying:
"Standard Life is obviously losing its competitive edge with this very poor result. The Norwich Union typical endowment payout last month at £50,295 was 25% higher than these results."
Standard Life sold £7BN of equities in 2004 after guidance from the Financial Services Authority on "strengthening" its financial reserves.
The result being that it now unable to take advantage, or rather its hapless endowment policy holders are unable to take advantage, of the booming stock market.
Given the fact that other insurers have performed better than this (even if their endowment policy holders are also out of pocket), I would suggest that the holders of Standard Life policies should be considering asking some very hard questions indeed about the quality of management of their funds.
Indeed they may laso like to consider aksing some hard questions of the FSA, as to why it gave such absurd advice.
More bad news for people holding useless and underperforming endowment mortages.
Standard Life have warned their 2 million with-profits customers that policies maturing this month will pay out on average 5% less than before, on comparable policies; this is despite the fact that share prices are booming.
The annual bonus rates on conventional with-profits policies are unchanged, but terminal bonuses are down.
The maturity value of a Standard Life 50 a month, 25 year mortgage endowment policy is now £40,459 this month, that is a massive fall of 18% when compared to the same policy of £49,511 in February last year.
John Gill, Standard's UK life and pensions managing director finance, is quoted as saying:
"By smoothing returns, we have protected policyholders from the full drop in asset values between 2000 and 2002."
Others are not taken in by this pr hype.
Clive Scott-Hopkins, from independent financial advisers Towry Law, is quoted as saying:
"Standard Life is obviously losing its competitive edge with this very poor result. The Norwich Union typical endowment payout last month at £50,295 was 25% higher than these results."
Standard Life sold £7BN of equities in 2004 after guidance from the Financial Services Authority on "strengthening" its financial reserves.
The result being that it now unable to take advantage, or rather its hapless endowment policy holders are unable to take advantage, of the booming stock market.
Given the fact that other insurers have performed better than this (even if their endowment policy holders are also out of pocket), I would suggest that the holders of Standard Life policies should be considering asking some very hard questions indeed about the quality of management of their funds.
Indeed they may laso like to consider aksing some hard questions of the FSA, as to why it gave such absurd advice.
Wednesday, February 01, 2006
The Financial Services Compensation Scheme Online Claim
The Financial Services Compensation Scheme Online Claim
The Financial Services Compensation Scheme (FSCS) has launched an online service today, to help people who think they may have been mis-sold an endowment policy decide whether they have a claim that FSCS may be able to help with.
FSCS is the UK's statutory fund of last resort for customers of financial services firms.
The FSCS can pay compensation to consumers if a financial services firm is unable, or likely to be unable, to pay claims against it.
The service is free to consumers.
The new online questionnaire is available on the FSCS website, www.fscs.org.uk.
It is designed to help speed up response times for consumers. It will help people determine whether FSCS may be able to help with their endowment complaint, and will automatically generate an application form for those who may have a claim.
Loretta Minghella, FSCS chief executive says:
"FSCS plays a vital role in protecting consumers and maintaining confidence in the industry.
Without our help thousands of consumers would have nowhere to turn. Since we became operational on 1 December 2001, FSCS has paid consumers over £650M in compensation.
Over the past couple of years endowment claims have been received at unprecedented levels, way beyond our expectations.
The processes we are putting in place should ensure a faster response for consumers and help us to deal with their enquiries more quickly."
The majority of new investment claims received by FSCS over the past couple of years relate to mortgage endowment claims.
It is expecting to receive 22,000 new endowment claims in the financial year 2005/06, and a further 26,000 in 2006/07.
This compares to just under 9,000 new endowment claims received in 2004/05.
Whether the FSCS will be able to handle this extra workload remains to be seen.
The solution, as I keep reminding you all, is for the life assurance industry to underwrite these useless underperforming products.
The Financial Services Compensation Scheme (FSCS) has launched an online service today, to help people who think they may have been mis-sold an endowment policy decide whether they have a claim that FSCS may be able to help with.
FSCS is the UK's statutory fund of last resort for customers of financial services firms.
The FSCS can pay compensation to consumers if a financial services firm is unable, or likely to be unable, to pay claims against it.
The service is free to consumers.
The new online questionnaire is available on the FSCS website, www.fscs.org.uk.
It is designed to help speed up response times for consumers. It will help people determine whether FSCS may be able to help with their endowment complaint, and will automatically generate an application form for those who may have a claim.
Loretta Minghella, FSCS chief executive says:
"FSCS plays a vital role in protecting consumers and maintaining confidence in the industry.
Without our help thousands of consumers would have nowhere to turn. Since we became operational on 1 December 2001, FSCS has paid consumers over £650M in compensation.
Over the past couple of years endowment claims have been received at unprecedented levels, way beyond our expectations.
The processes we are putting in place should ensure a faster response for consumers and help us to deal with their enquiries more quickly."
The majority of new investment claims received by FSCS over the past couple of years relate to mortgage endowment claims.
It is expecting to receive 22,000 new endowment claims in the financial year 2005/06, and a further 26,000 in 2006/07.
This compares to just under 9,000 new endowment claims received in 2004/05.
Whether the FSCS will be able to handle this extra workload remains to be seen.
The solution, as I keep reminding you all, is for the life assurance industry to underwrite these useless underperforming products.
Monday, January 30, 2006
Guardian Assurance Fined
Guardian Assurance Fined
Guardian Assurance was fined £750K last week by the Financial Services Authority (FSA), for its poor complaints handling procedures over this period.
The FSA said that the numbers of complaints made to Guardian about failed endowment policies, which were being rejected, rose from 29% to 77% after the company introduced new complaints handling procedures.
Guardian will now contact the 5,600 customers whose complaints were rejected during this period.
The company has also set up a helpline for customers with concerns, and said it welcomes their questions.
Ring 0845 701 0210 to speak to them.
Those of you who have managed to extract compensation from Guardian should revisit that comepnesation, and see if the amount is actually enough.
All of this extra expense, damage to reputation and hassle could be avoided if the life assurance firms finally bit the bullet and agreed to underwrite these useless and failing policies.
Guardian Assurance was fined £750K last week by the Financial Services Authority (FSA), for its poor complaints handling procedures over this period.
The FSA said that the numbers of complaints made to Guardian about failed endowment policies, which were being rejected, rose from 29% to 77% after the company introduced new complaints handling procedures.
Guardian will now contact the 5,600 customers whose complaints were rejected during this period.
The company has also set up a helpline for customers with concerns, and said it welcomes their questions.
Ring 0845 701 0210 to speak to them.
Those of you who have managed to extract compensation from Guardian should revisit that comepnesation, and see if the amount is actually enough.
All of this extra expense, damage to reputation and hassle could be avoided if the life assurance firms finally bit the bullet and agreed to underwrite these useless and failing policies.
Thursday, January 26, 2006
Legal and General's Record Year
Legal and General's Record Year
Congratulations to Legal and General (L&G), the life assurance firm, who have announced record results today.
L&G new business has risen 29% compared with the previous year, to £1.3BN, as a result of strong demand for savings products and growth in personal pensions.
The 29% increase in new business was at the top end of analysts' expectations.
Sales also rose by 27%, in the final quarter of the year.
Tim Breedon, chief executive, said:
"This has been a year of remarkable growth for Legal & General. Our UK new business grew by almost a third in 2005 and our investment management business won a record £17.1BN."
Now if they could address the concerns of those of us with failing endowment policies, by underwriting these useless products, we would all be able to open the champagne bottles and toast their success.
Congratulations to Legal and General (L&G), the life assurance firm, who have announced record results today.
L&G new business has risen 29% compared with the previous year, to £1.3BN, as a result of strong demand for savings products and growth in personal pensions.
The 29% increase in new business was at the top end of analysts' expectations.
Sales also rose by 27%, in the final quarter of the year.
Tim Breedon, chief executive, said:
"This has been a year of remarkable growth for Legal & General. Our UK new business grew by almost a third in 2005 and our investment management business won a record £17.1BN."
Now if they could address the concerns of those of us with failing endowment policies, by underwriting these useless products, we would all be able to open the champagne bottles and toast their success.
Friday, January 20, 2006
Norwich Reduces Payouts
Norwich Reduces Payouts
Norwich Union have dealt a body blow to their long suffering endowment mortgage policyholders, who have been warned to expect a low payout this year.
This is despite the fact that Norwich's main profits fund achieved an overall return of 17.7% before tax.
A policyholder with a 25-year, £50 a month Norwich Union endowment mortgage maturing this month will receive 4% less than he would have done if the policy were to have matured in 2005.
Norwich stated:
"In general, shorter-term policies show increases or small decreases compared to equivalent policies maturing a year ago, while those with a term of 20 and 25 years will generally be lower."
However, Norwich Union went on to say that in many cases an increase is seen when the surrender value of the policy a year ago is compared to the maturity value now.
Well of course it would, surrender values are normally lower than maturity values!
Please don't treat your policyholders in such a patronising manner.
Norwich Union have dealt a body blow to their long suffering endowment mortgage policyholders, who have been warned to expect a low payout this year.
This is despite the fact that Norwich's main profits fund achieved an overall return of 17.7% before tax.
A policyholder with a 25-year, £50 a month Norwich Union endowment mortgage maturing this month will receive 4% less than he would have done if the policy were to have matured in 2005.
Norwich stated:
"In general, shorter-term policies show increases or small decreases compared to equivalent policies maturing a year ago, while those with a term of 20 and 25 years will generally be lower."
However, Norwich Union went on to say that in many cases an increase is seen when the surrender value of the policy a year ago is compared to the maturity value now.
Well of course it would, surrender values are normally lower than maturity values!
Please don't treat your policyholders in such a patronising manner.
Monday, January 16, 2006
Time Barring Petition
Time Barring Petition
Merryn Matt has set up an online petition calling for the practice of time barring to be ended.
Extract from the site, www.timebar.org:
"Did you know that the Financial Services Authority (FSA) has slapped time limits - known as 'Time Barring' - for compensation claims against Life Companies for endowment policies which may have been mis-sold?
Time Barring is unfair, unclear and misleading. Approximately 1 million of the UK's 7.5 million endowment policyholders may already be Time Barred from claiming according to the FSA.
These rules operate in favour of the companies that sold the policies - saving them and costing you millions of pounds.
How can this be right?
This petition calls on the Government and the Financial Services Authority to put an end to the confusion and dishonesty surrounding mis-sold endowment policies, once and for all."
I wish her well.
Don't forget to sign my petition though:)
Merryn Matt has set up an online petition calling for the practice of time barring to be ended.
Extract from the site, www.timebar.org:
"Did you know that the Financial Services Authority (FSA) has slapped time limits - known as 'Time Barring' - for compensation claims against Life Companies for endowment policies which may have been mis-sold?
Time Barring is unfair, unclear and misleading. Approximately 1 million of the UK's 7.5 million endowment policyholders may already be Time Barred from claiming according to the FSA.
These rules operate in favour of the companies that sold the policies - saving them and costing you millions of pounds.
How can this be right?
This petition calls on the Government and the Financial Services Authority to put an end to the confusion and dishonesty surrounding mis-sold endowment policies, once and for all."
I wish her well.
Don't forget to sign my petition though:)
Friday, January 13, 2006
Guardian Assurance Fined
Guardian Assurance Fined
Guardian Assurance and its associated company Guardian Linked Life have been fined £750K by the Financail Services Authority (FSA) for mishandling endowment complaints.
This is the fourth time that the FSA has fined an insurance company for mishandling complaints.
The FSA said that Guardian's complaints procedure had "serious systemic flaws".
As a result, 5,600 customers had their complaints wrongly rejected, and thus could have lost out on compensation.
Margaret Cole, the FSA's Director of Enforcement, said:
"Guardian failed to treat its customers fairly by exposing those with a valid complaint to the risk that their complaint could be rejected inappropriately.
Consequently, they may not have received the compensation to which they were entitled.
These failings exposed a high number of consumers to potential financial loss."
The FSA role of shame:
-Friends Provident, December 2003, fined £675K
-Dunbar Assurance, March 2004, fined £725K
-Abbey National, May 2005, fined £800K
Between 1988 and 1995 Guardian sold 233,000 endowment policies, before it stopped marketing them.
It received nearly 20,000 complaints from April 2000 to the end of 2004.
At one stage it was rejecting more than three quarters of all its complaints.
I wonder how many other insurance companies are mishandling complaints?
Guardian Assurance and its associated company Guardian Linked Life have been fined £750K by the Financail Services Authority (FSA) for mishandling endowment complaints.
This is the fourth time that the FSA has fined an insurance company for mishandling complaints.
The FSA said that Guardian's complaints procedure had "serious systemic flaws".
As a result, 5,600 customers had their complaints wrongly rejected, and thus could have lost out on compensation.
Margaret Cole, the FSA's Director of Enforcement, said:
"Guardian failed to treat its customers fairly by exposing those with a valid complaint to the risk that their complaint could be rejected inappropriately.
Consequently, they may not have received the compensation to which they were entitled.
These failings exposed a high number of consumers to potential financial loss."
The FSA role of shame:
-Friends Provident, December 2003, fined £675K
-Dunbar Assurance, March 2004, fined £725K
-Abbey National, May 2005, fined £800K
Between 1988 and 1995 Guardian sold 233,000 endowment policies, before it stopped marketing them.
It received nearly 20,000 complaints from April 2000 to the end of 2004.
At one stage it was rejecting more than three quarters of all its complaints.
I wonder how many other insurance companies are mishandling complaints?
Tuesday, January 10, 2006
FSA Tries To Clean Up Its Act
FSA Tries To Clean Up Its Act
The Financial Services Authority (FSA), stung by recent criticism of its poor litigation record, is now trying to clean up its act.
The FSA has created a new unit to 'stress test' enforcement cases, before they are taken to formal disciplinary review.
The new litigation and legal review unit aims to review the evidence and recommendations that the FSA's enforcement division puts before the Regulatory Decisions Committee (RDC), which makes the FSA's disciplinary decisions.
The change is not receiving unanimous support. One City lawyer warned that the unit could potentially "result in a bottleneck", and drastically slow down the disciplinary process.
The FSA's came under strong criticism during 2005, most notably after the rejection of its endowment misselling case against Legal & General by the Financial Services and Markets Tribunal.
FSA director of enforcement Margaret Cole said it was hoped that the new unit would result in more successful rulings before the RDC, by ensuring that cases were "effectively stress-tested before going before the RDC".
We shall see.
The most effective change that the FSA should make, would be to compel the life assurance companies to underwrite their useless and underperforming endowment policies.
The Financial Services Authority (FSA), stung by recent criticism of its poor litigation record, is now trying to clean up its act.
The FSA has created a new unit to 'stress test' enforcement cases, before they are taken to formal disciplinary review.
The new litigation and legal review unit aims to review the evidence and recommendations that the FSA's enforcement division puts before the Regulatory Decisions Committee (RDC), which makes the FSA's disciplinary decisions.
The change is not receiving unanimous support. One City lawyer warned that the unit could potentially "result in a bottleneck", and drastically slow down the disciplinary process.
The FSA's came under strong criticism during 2005, most notably after the rejection of its endowment misselling case against Legal & General by the Financial Services and Markets Tribunal.
FSA director of enforcement Margaret Cole said it was hoped that the new unit would result in more successful rulings before the RDC, by ensuring that cases were "effectively stress-tested before going before the RDC".
We shall see.
The most effective change that the FSA should make, would be to compel the life assurance companies to underwrite their useless and underperforming endowment policies.
Wednesday, December 14, 2005
The Pain of Mis-selling
The Pain of Mis-selling
It seems that it is not just the hapless owners of underperforming and useless endowment polices that are suffering, sometimes a little of the pain and misery caused by these useless products is spread around.
Mis-selling endowment policies has cost Lloyds TSB has £150M this year, that is in addition to the £360M already paid out in recent years for compensation claims over a variety of financial products.
Lloyds TSB is still reviewing the total cost of compensating its customers, but admitted that this could lead to an increased provision in the accounts.
In a trading update before its 2005 figures, Lloyds TSB revealed that it would also need to set aside another £150M to cover the cost on insurance policies of people living longer.
Lloyds TSB is not the only bank facing claims for mis-selling of endowment policies. HBOS has had to put aside £260M over the last two years.
Lloyds TSB warned that customers were continuing to have difficulty repaying their debts.
How can people be expected to repay their mortgage, if the policy that they bought to repay the mortgage doesn't work?
Analysts at Dresdner Kleinwort Wasserstein have described Lloyds as "strategically challenged". There is now speculation that it may be a takeover target.
What goes around, comes around!
It seems that it is not just the hapless owners of underperforming and useless endowment polices that are suffering, sometimes a little of the pain and misery caused by these useless products is spread around.
Mis-selling endowment policies has cost Lloyds TSB has £150M this year, that is in addition to the £360M already paid out in recent years for compensation claims over a variety of financial products.
Lloyds TSB is still reviewing the total cost of compensating its customers, but admitted that this could lead to an increased provision in the accounts.
In a trading update before its 2005 figures, Lloyds TSB revealed that it would also need to set aside another £150M to cover the cost on insurance policies of people living longer.
Lloyds TSB is not the only bank facing claims for mis-selling of endowment policies. HBOS has had to put aside £260M over the last two years.
Lloyds TSB warned that customers were continuing to have difficulty repaying their debts.
How can people be expected to repay their mortgage, if the policy that they bought to repay the mortgage doesn't work?
Analysts at Dresdner Kleinwort Wasserstein have described Lloyds as "strategically challenged". There is now speculation that it may be a takeover target.
What goes around, comes around!
Thursday, December 08, 2005
Backing For Scottish Endowment Compensation
Backing For Scottish Endowment Compensation
Opposition parties in Scotland have publicly committed their support to the campaign to secure compensation for thousands of Scottish homeowners, who were mis-sold endowment mortgages by their solicitor.
Charles Kennedy, Liberal Democrat leader, and Alex Salmond, SNP leader, urged the government to close a legal loophole which leaves many Scots facing huge shortfalls.
People who bought a policy through a lawyer in Scotland, before December 2001, do not qualify for a settlement under the Financial Services and Markets Act.
Mr Kennedy said:
"It is an absurd situation if people in Scotland don't have the same protection against endowment mis-selling as homeowners in England and Wales. It must be put right immediately."
Opposition parties in Scotland have publicly committed their support to the campaign to secure compensation for thousands of Scottish homeowners, who were mis-sold endowment mortgages by their solicitor.
Charles Kennedy, Liberal Democrat leader, and Alex Salmond, SNP leader, urged the government to close a legal loophole which leaves many Scots facing huge shortfalls.
People who bought a policy through a lawyer in Scotland, before December 2001, do not qualify for a settlement under the Financial Services and Markets Act.
Mr Kennedy said:
"It is an absurd situation if people in Scotland don't have the same protection against endowment mis-selling as homeowners in England and Wales. It must be put right immediately."
Friday, December 02, 2005
Scots May Get Compensation
Scots May Get Compensation
Scots who claim they have been mis-sold endowment mortgages, may finally be compensated.
They have taken their dispute to Westminster, where MPs have signed a Commons motion demanding an end to a loophole which currently means that Scots who bought policies through lawyers are not due any settlements.
The House of Commons Treasury Select Committee is also calling for urgent action.
Scots who bought endowment policies through solicitors before December 1 2001, do not qualify for compensation from the Financial Ombudsman Service.
This was the date when the Financial Services and Markets Act came into effect.
This also means Scots who were mis-sold endowment policies by lawyers before the 2001 deadline, can only receive £1K maximum payout set by the Law Society.
Scots who claim they have been mis-sold endowment mortgages, may finally be compensated.
They have taken their dispute to Westminster, where MPs have signed a Commons motion demanding an end to a loophole which currently means that Scots who bought policies through lawyers are not due any settlements.
The House of Commons Treasury Select Committee is also calling for urgent action.
Scots who bought endowment policies through solicitors before December 1 2001, do not qualify for compensation from the Financial Ombudsman Service.
This was the date when the Financial Services and Markets Act came into effect.
This also means Scots who were mis-sold endowment policies by lawyers before the 2001 deadline, can only receive £1K maximum payout set by the Law Society.
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.
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.
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.
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..".
98%?
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?
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..".
98%?
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.
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.
Monday, October 24, 2005
Ever Wondered?
Ever Wondered?
Those of you who are sitting on an unhealthy endowment shortfall, there are estimated to be around 8 million of you, may be wondering why more has not been done by the Financial services Authority (FSA) to bring those who manage these useless polices (ie the life assurance companies) to book.
Well the answer can be found in a speech made, a month ago in Washington, by Sir Howard Davies.
Sir Howard Davies is the director of the London School of Economics, and the former chairman of the FSA.
When he was head of the FSA, Davies decided against playing hard ball with the life assurance industry in respect of their mis-sold and mismanaged endowment mortgages.
In his speech he noted that a more aggressive approach "could perhaps be justified in consumer protection terms". However, it "could well have generated a systemic crisis", because "the amount of compensation politically payable would have threatened the viability of many insurance companies".
In other words he was afraid of the consequences of doing the right thing, because it would hurt the life assurance companies.
A cynic might argue that he was protecting the powerful life assurance lobby, because he was more afraid of them than he was of the hapless consumers who bought these underperforming and useless endowment policies.
Regrettably, it seems, the "old boys network" is still alive and flourishing in Britain.
I assume that Sir Howard, and the life assurance industry did not buy any of these products themselves?
Those of you who are sitting on an unhealthy endowment shortfall, there are estimated to be around 8 million of you, may be wondering why more has not been done by the Financial services Authority (FSA) to bring those who manage these useless polices (ie the life assurance companies) to book.
Well the answer can be found in a speech made, a month ago in Washington, by Sir Howard Davies.
Sir Howard Davies is the director of the London School of Economics, and the former chairman of the FSA.
When he was head of the FSA, Davies decided against playing hard ball with the life assurance industry in respect of their mis-sold and mismanaged endowment mortgages.
In his speech he noted that a more aggressive approach "could perhaps be justified in consumer protection terms". However, it "could well have generated a systemic crisis", because "the amount of compensation politically payable would have threatened the viability of many insurance companies".
In other words he was afraid of the consequences of doing the right thing, because it would hurt the life assurance companies.
A cynic might argue that he was protecting the powerful life assurance lobby, because he was more afraid of them than he was of the hapless consumers who bought these underperforming and useless endowment policies.
Regrettably, it seems, the "old boys network" is still alive and flourishing in Britain.
I assume that Sir Howard, and the life assurance industry did not buy any of these products themselves?
Friday, October 21, 2005
Scottish Endowment Diary
Scottish Endowment Diary
We are not alone, Gail McEwan has just launched the Scottish Endowment Diary.
She is campaigning for fresh legislation which will give consumers who were mis-sold endowment policies by solicitors in 1990's, the same rights of redress as customers of financial services firms.
Quote from her site:
"This is a brand new website and is dedicated to all of you who have been 'ripped off' by Scottish Solicitors. (A Legal Profession who have abdicated all responsibility for the devastating consequences for thousands of Scottish people who have been left in financial distress because of shortfalls in their policies)."
The site can be accessed via this link Scottish Endowment Diary.
We are not alone, Gail McEwan has just launched the Scottish Endowment Diary.
She is campaigning for fresh legislation which will give consumers who were mis-sold endowment policies by solicitors in 1990's, the same rights of redress as customers of financial services firms.
Quote from her site:
"This is a brand new website and is dedicated to all of you who have been 'ripped off' by Scottish Solicitors. (A Legal Profession who have abdicated all responsibility for the devastating consequences for thousands of Scottish people who have been left in financial distress because of shortfalls in their policies)."
The site can be accessed via this link Scottish Endowment Diary.
Thursday, October 13, 2005
A Day
A Day
A Day, when a new set of pension rules will be introduced, may well have implications for those expecting a shortfall in their endowment policy.
The A Day regulations will replace much of the existing pension legislation, which has been built up over previous decades.
The BBC website has a summary about A Day, and is worthwhile visiting.
I must emphasise that any decisions regarding money should only be made after taking legal and financial advice from suitably qualified, competent and independent legal/financial experts.
A Day, when a new set of pension rules will be introduced, may well have implications for those expecting a shortfall in their endowment policy.
The A Day regulations will replace much of the existing pension legislation, which has been built up over previous decades.
The BBC website has a summary about A Day, and is worthwhile visiting.
I must emphasise that any decisions regarding money should only be made after taking legal and financial advice from suitably qualified, competent and independent legal/financial experts.
Wednesday, October 12, 2005
Standard Life Says It Is On Course
Standard Life Says It Is On Course
Following on from the previous article about the possibility of Standard Life delaying its planned flotation, because of unresolved issues with the FSA, Standard Life has stated that its plans are on track.
The FSA was reported to have been scrutinising Standard Life's liabilities for its mortgage endowment promise and its endowment complaints, and would need to be satisfied "by the end of this month" if the flotation timetable was to be met.
Standard Life have stated:
"The FSA and Standard Life are in continual dialogue, and that will take place up until the company's IPO (initial public offering.
Any changes that the company has put in place over the last year, the FSA must continuously be satisfied that it can meet its obligations."
They then went on to note that the endowment complaint issue was "a red herring".
They hold a provision for meeting their endowment promise of £393m.
The mortgage endowment promise was introduced in September 2000.
It promised that for the 770,000 customers who faced a shortfall at that time, the deficit would be made up by the insurer, providing underlying assets grew by at least 6% a year after tax.
Those whose policies went into the "amber" or "red" zone after September 2000 were never covered, but the 65,000 whose policies mature before the end of this year will still be topped up in full.
However, Standard Life reneged on its promise; top-ups will still be applied to the remainder, but limited to between 40% and 60% of what was promised.
Following on from the previous article about the possibility of Standard Life delaying its planned flotation, because of unresolved issues with the FSA, Standard Life has stated that its plans are on track.
The FSA was reported to have been scrutinising Standard Life's liabilities for its mortgage endowment promise and its endowment complaints, and would need to be satisfied "by the end of this month" if the flotation timetable was to be met.
Standard Life have stated:
"The FSA and Standard Life are in continual dialogue, and that will take place up until the company's IPO (initial public offering.
Any changes that the company has put in place over the last year, the FSA must continuously be satisfied that it can meet its obligations."
They then went on to note that the endowment complaint issue was "a red herring".
They hold a provision for meeting their endowment promise of £393m.
The mortgage endowment promise was introduced in September 2000.
It promised that for the 770,000 customers who faced a shortfall at that time, the deficit would be made up by the insurer, providing underlying assets grew by at least 6% a year after tax.
Those whose policies went into the "amber" or "red" zone after September 2000 were never covered, but the 65,000 whose policies mature before the end of this year will still be topped up in full.
However, Standard Life reneged on its promise; top-ups will still be applied to the remainder, but limited to between 40% and 60% of what was promised.
Monday, October 10, 2005
Standard Life Float Delayed
Standard Life Float Delayed
It is reported that Standard Life's flotation might be delayed until 2007, due to outstanding issues with the Financial Services Authority (FSA) over endowment mortgages.
The float was originally planned to happen in 2006. However, the FSA is reported to be seeking assurances from the company over a number of issues; including allocation of capital and how much new money they want to raise.
Specifically the FSA want clarification over assurances that Standard Life gave last year, when it announced that it was unable to fulfill its mortgage promise to 600,000 holders of endowment policies.
Standard Life also set a deadline of May 2006 for considering mis-selling complaints over endowment policies, this hits 350,000 endowment policy holders.
Standard Life has set aside £393m to pay top-ups to policyholders facing shortfalls.
However, customers whose endowment policies mature after the end of this year will receive only 40%-60% of the top-ups.
You will recall that the FSA and Standard Life had something of a run in earlier last year; the dispute, over the measurement of its solvency, forced Standard Life to change its chief executive and reverse its long-standing opposition to demutualisation and sell £7.5bn of equities.
What goes around comes around!
It is reported that Standard Life's flotation might be delayed until 2007, due to outstanding issues with the Financial Services Authority (FSA) over endowment mortgages.
The float was originally planned to happen in 2006. However, the FSA is reported to be seeking assurances from the company over a number of issues; including allocation of capital and how much new money they want to raise.
Specifically the FSA want clarification over assurances that Standard Life gave last year, when it announced that it was unable to fulfill its mortgage promise to 600,000 holders of endowment policies.
Standard Life also set a deadline of May 2006 for considering mis-selling complaints over endowment policies, this hits 350,000 endowment policy holders.
Standard Life has set aside £393m to pay top-ups to policyholders facing shortfalls.
However, customers whose endowment policies mature after the end of this year will receive only 40%-60% of the top-ups.
You will recall that the FSA and Standard Life had something of a run in earlier last year; the dispute, over the measurement of its solvency, forced Standard Life to change its chief executive and reverse its long-standing opposition to demutualisation and sell £7.5bn of equities.
What goes around comes around!
Tuesday, October 04, 2005
MP Acts
MP Acts
Sandra Osborne, a Scottish MP, has promised to act and to try to help thousands of house owners who have been mis-sold mortgage endowment policies.
Sandra Osborne helped bring in new rules governing the sale of endowment policies by banks and building societies.
She said that she intended to lobby the government to help the thousands of people who have been mis-sold the same policies by their solicitor.
She was prompted to act after listening to BBC Radio Scotland's series, The Investigation.
The show explained how many people, who were mis-sold these policies in the 1980's and 90's by banks, building societies and other financial institutions, have successfully claimed compensation for performance shortfalls.
However, it seems that Scots who were sold identical policies by their solicitor when buying their homes have virtually no hope of being compensated for their losses.
The programme featured Gail McEwan, who is running a campaign to win compensation for people in Scotland.
If you think you have been mis-sold an endowment policy by your solicitor and want to join Gail McEwan's campaign to get parliament to act, you can contact her at PO Box 19582, Johnstone.
I wish her every success.
Sandra Osborne, a Scottish MP, has promised to act and to try to help thousands of house owners who have been mis-sold mortgage endowment policies.
Sandra Osborne helped bring in new rules governing the sale of endowment policies by banks and building societies.
She said that she intended to lobby the government to help the thousands of people who have been mis-sold the same policies by their solicitor.
She was prompted to act after listening to BBC Radio Scotland's series, The Investigation.
The show explained how many people, who were mis-sold these policies in the 1980's and 90's by banks, building societies and other financial institutions, have successfully claimed compensation for performance shortfalls.
However, it seems that Scots who were sold identical policies by their solicitor when buying their homes have virtually no hope of being compensated for their losses.
The programme featured Gail McEwan, who is running a campaign to win compensation for people in Scotland.
If you think you have been mis-sold an endowment policy by your solicitor and want to join Gail McEwan's campaign to get parliament to act, you can contact her at PO Box 19582, Johnstone.
I wish her every success.
Monday, September 19, 2005
New Forum
New Forum
The financial services industry is supporting a new forum to improve the quality of products and services provided to the retail investor.
The Retail Financial Services Forum will bring together representatives of banks, insurers and financial advisers to test out new ideas and initiatives and to promote best practice.
It will meet quarterly, starting on October 21, and will publish details of its deliberations on the internet.
The financial services industry is supporting a new forum to improve the quality of products and services provided to the retail investor.
The Retail Financial Services Forum will bring together representatives of banks, insurers and financial advisers to test out new ideas and initiatives and to promote best practice.
It will meet quarterly, starting on October 21, and will publish details of its deliberations on the internet.
Monday, September 12, 2005
Campaign Launched
Campaign Launched
Gail McEwan from Scotland is planning to mount a nationwide campaign for justice on behalf of hundreds of Scots, allegedly missold mortgage endowments by solicitors.
She has been awarded £700 in compensation by the legal services ombudsman, after the Law Society of Scotland bungled her own complaints about a policy she was sold by a Glasgow firm of lawyers.
However, she still has a shortfall which she wishes to be made good.
She plans to pressure MSPs, and the Scottish Executive, for fresh legislation which would give consumers who were missold endowments the same rights of redress as customers of financial services firms.
The Herald has the full details here.
I wish her the very best of luck.
Gail McEwan from Scotland is planning to mount a nationwide campaign for justice on behalf of hundreds of Scots, allegedly missold mortgage endowments by solicitors.
She has been awarded £700 in compensation by the legal services ombudsman, after the Law Society of Scotland bungled her own complaints about a policy she was sold by a Glasgow firm of lawyers.
However, she still has a shortfall which she wishes to be made good.
She plans to pressure MSPs, and the Scottish Executive, for fresh legislation which would give consumers who were missold endowments the same rights of redress as customers of financial services firms.
The Herald has the full details here.
I wish her the very best of luck.
Thursday, September 08, 2005
It's An Ill Wind..
It's An Ill Wind...
As the saying goes, "it's an ill wind that blows nobody any good". This certainly appears to be the case for Avalon, a firm of solicitors based in Warrington.
Whilst those of you who hold underperforming endowment policies may be wondering how to pay off the shortfall, Avalon are doing rather well out of the crisis.
Avalon is headed by former TV presenter, Andrew Nulty, and has recently opened a second office. Its turnover is now £5m for the 12 months to the end of July.
Mr Nulty, who presented "Hitman and Her" before setting up Avalon in Manchester four years ago, is confident that fee income will reach £15m over the next year as the firm's caseload is expected to increase.
Avalon switched from being a personal injury practice, to one specialising in industrial disease (eg mining compensation claims) and financial negligence cases.
Mr Nulty is leading a team of 30, who are acting for thousands of people who claim to have been mis-sold endowment policies.
Quote:
"We saw a niche in the market. We are representing thousands of people who are facing shortfalls on their endowment policies.
Our role is to recoup their losses from the insurance companies, and we take a percentage of the money they receive as a fee."
As the saying goes, "it's an ill wind that blows nobody any good". This certainly appears to be the case for Avalon, a firm of solicitors based in Warrington.
Whilst those of you who hold underperforming endowment policies may be wondering how to pay off the shortfall, Avalon are doing rather well out of the crisis.
Avalon is headed by former TV presenter, Andrew Nulty, and has recently opened a second office. Its turnover is now £5m for the 12 months to the end of July.
Mr Nulty, who presented "Hitman and Her" before setting up Avalon in Manchester four years ago, is confident that fee income will reach £15m over the next year as the firm's caseload is expected to increase.
Avalon switched from being a personal injury practice, to one specialising in industrial disease (eg mining compensation claims) and financial negligence cases.
Mr Nulty is leading a team of 30, who are acting for thousands of people who claim to have been mis-sold endowment policies.
Quote:
"We saw a niche in the market. We are representing thousands of people who are facing shortfalls on their endowment policies.
Our role is to recoup their losses from the insurance companies, and we take a percentage of the money they receive as a fee."
Monday, September 05, 2005
Higher Fines Urged
Higher Fines Urged
Which?, the consumer group, is urging the Financial Services Authority (FSA) to significantly increase the fines it imposes on companies found guilty of mis-selling; in an attempt to crack down on the financial services industry.
Which? says that it wants the Financial Services Authority to levy penalties that are big enough to alarm institutional investors that own shares in the companies facing fines.
Which? believes large penalties would persuade investors to put pressure on financial services companies to prevent mis-selling.
Not a moment too soon in my view.
Which?, the consumer group, is urging the Financial Services Authority (FSA) to significantly increase the fines it imposes on companies found guilty of mis-selling; in an attempt to crack down on the financial services industry.
Which? says that it wants the Financial Services Authority to levy penalties that are big enough to alarm institutional investors that own shares in the companies facing fines.
Which? believes large penalties would persuade investors to put pressure on financial services companies to prevent mis-selling.
Not a moment too soon in my view.
Monday, August 29, 2005
Further Endowment Confusion
Further Endowment Confusion
As if endowment policy holders were not confused and worried enough, there is now a report that suggests that some of the warnings of shortfalls may in fact be wrong.
According to Independent Financial Adviser, Alan Lakey of Highclere Financial Services, not all endowments linked to a mortgage, where red or amber warning letters have been issued, will suffer a shortfall.
In a report in Money Management magazine, he warns that some are being sent out where no real risk exists.
"What began as an exercise designed to advise policyholders of the probable maturity value of their plans, and the possible need to take remedial action, has since turned into a major bloodletting,".
Lakey makes the point that the typical reprojection letter appears to show the with profit endowment as off track, and unlikely to hit the relevant target. However, he points out that not all red or amber warning letters are issued on the same basis.
He also notes that the deluge of warnings has led to the creation of a compensation industry, designed to extract money from the hapless policy holders.
To my view the best way for the life assurance industry to restore some of their shattered credibility, and brand value, would be for them to unconditionally underwrite their endowment products.
This would, at a single stroke, eliminate the need for a compensation industry which is living off the misery of policy holders.
As if endowment policy holders were not confused and worried enough, there is now a report that suggests that some of the warnings of shortfalls may in fact be wrong.
According to Independent Financial Adviser, Alan Lakey of Highclere Financial Services, not all endowments linked to a mortgage, where red or amber warning letters have been issued, will suffer a shortfall.
In a report in Money Management magazine, he warns that some are being sent out where no real risk exists.
"What began as an exercise designed to advise policyholders of the probable maturity value of their plans, and the possible need to take remedial action, has since turned into a major bloodletting,".
Lakey makes the point that the typical reprojection letter appears to show the with profit endowment as off track, and unlikely to hit the relevant target. However, he points out that not all red or amber warning letters are issued on the same basis.
He also notes that the deluge of warnings has led to the creation of a compensation industry, designed to extract money from the hapless policy holders.
To my view the best way for the life assurance industry to restore some of their shattered credibility, and brand value, would be for them to unconditionally underwrite their endowment products.
This would, at a single stroke, eliminate the need for a compensation industry which is living off the misery of policy holders.
Tuesday, August 23, 2005
Standard Life
Standard Life
Nice results from Standard Life.
Standard Life announced a 4% rise in first-half revenues today, as business improved in its home market, boosted by new personalised pension plans.
The insurer, which is expected to float next year, said insurance sales for the first six months of 2005 rose from £593M to £619M and sales of life products and pensions in its key home market rose 10% to £459M.
I wonder if their endowment policy holders are also feeling pleased?
Nice results from Standard Life.
Standard Life announced a 4% rise in first-half revenues today, as business improved in its home market, boosted by new personalised pension plans.
The insurer, which is expected to float next year, said insurance sales for the first six months of 2005 rose from £593M to £619M and sales of life products and pensions in its key home market rose 10% to £459M.
I wonder if their endowment policy holders are also feeling pleased?
Thursday, August 18, 2005
Selling Endowments
Selling Endowments
The Scotsman has some interesting background material about selling endowment policies, see Selling Endowments.
However, as they warn, this does not constitute investment advice and you should seek independent financial advice if you are unsure as to the suitability of any investment for your circumstances. Past performance is not an indication of future performance. The value of investments may fall as well as rise and you might not get back the full amount invested.
The Scotsman has some interesting background material about selling endowment policies, see Selling Endowments.
However, as they warn, this does not constitute investment advice and you should seek independent financial advice if you are unsure as to the suitability of any investment for your circumstances. Past performance is not an indication of future performance. The value of investments may fall as well as rise and you might not get back the full amount invested.
Monday, August 08, 2005
Standard Life Fails To Deliver
Standard Life Fails To Deliver
According to new figures, those people unfortunate enough to have an endowment policy maturing with Standard Life this year will not only miss out on any windfall but have had to endure a further decline in their investments over the past year.
It seems that Standard Life's useless endowment policies have produced a negative return of 2.7% this year.
Pathetic!
The figures were revealed as Standard Life unveiled its mid-year "bonus declaration", and made a useless attempt to focus attention on one-year returns of existing policies rather than the year-on-year change for maturing policies.
I think that it is time for the hapless holders of these useless, and underperforming, polices to act up.
According to new figures, those people unfortunate enough to have an endowment policy maturing with Standard Life this year will not only miss out on any windfall but have had to endure a further decline in their investments over the past year.
It seems that Standard Life's useless endowment policies have produced a negative return of 2.7% this year.
Pathetic!
The figures were revealed as Standard Life unveiled its mid-year "bonus declaration", and made a useless attempt to focus attention on one-year returns of existing policies rather than the year-on-year change for maturing policies.
I think that it is time for the hapless holders of these useless, and underperforming, polices to act up.
Friday, August 05, 2005
HBOS Increases Provisions
HBOS Increases Provisions
HBOS has reported an interim six month profit of £2.2BN, an increase of 15%.
In view of this success HBOS has set aside an other £130M, on top of the existing £130M already set aside, to cover claims for endowment policy misselling.
HBOS increased their dividends by 9% to 11.75p.
HBOS has reported an interim six month profit of £2.2BN, an increase of 15%.
In view of this success HBOS has set aside an other £130M, on top of the existing £130M already set aside, to cover claims for endowment policy misselling.
HBOS increased their dividends by 9% to 11.75p.
Monday, August 01, 2005
From Bad To Worse
From Bad To Worse
The endowment policy crisis could be far worse than experts expect.
That is the view of Clive Cowdery, chief executive of Resolution Life. He predicts that the amount of assets held in close funds funds will double to £400BN, in the next five years, as more insurers shut off their funds to new money.
Closed funds do not take in contributions, their only purpose is to pay existing liabilities; in other words they are winding down, as such their returns are lower than open ones.
Cowdery believes that closed funds will account for 15 million policies by 2011.
That will be when the "fun really starts"; as people realise that their funds don't work, and wake up to the fact that they have a debt that they cannot afford to settle.
I would hope that, despite the fact that the life assurance companies are doing their best to sweep the biggest financial scandal of the 20th century under the carpet, people wake up to this disaster a little earlier than that.
Time for the politicians to wake up as well!
The endowment policy crisis could be far worse than experts expect.
That is the view of Clive Cowdery, chief executive of Resolution Life. He predicts that the amount of assets held in close funds funds will double to £400BN, in the next five years, as more insurers shut off their funds to new money.
Closed funds do not take in contributions, their only purpose is to pay existing liabilities; in other words they are winding down, as such their returns are lower than open ones.
Cowdery believes that closed funds will account for 15 million policies by 2011.
That will be when the "fun really starts"; as people realise that their funds don't work, and wake up to the fact that they have a debt that they cannot afford to settle.
I would hope that, despite the fact that the life assurance companies are doing their best to sweep the biggest financial scandal of the 20th century under the carpet, people wake up to this disaster a little earlier than that.
Time for the politicians to wake up as well!
Thursday, July 28, 2005
Mortgage Advisory Centre In Liquidation
Mortgage Advisory Centre In Liquidation
Mortgage Advisory Centre, based in Edinburgh, run by Robert McGrail, a businessman and shareholder in Hearts football club, has reportedly gone into liquidation.
The Financial Services Authority is expected to issue a statement about the firm, within the next few days. It is unclear how many customers have complained about endowment mortgages sold by the company.
Mr McGrail is reported to control the independent broker First Mortgage Direct.
Mortgage Advisory Centre, based in Edinburgh, run by Robert McGrail, a businessman and shareholder in Hearts football club, has reportedly gone into liquidation.
The Financial Services Authority is expected to issue a statement about the firm, within the next few days. It is unclear how many customers have complained about endowment mortgages sold by the company.
Mr McGrail is reported to control the independent broker First Mortgage Direct.
Tuesday, July 26, 2005
Misery For Scottish Widows
Misery For Scottish Widows
Bad news for those of you who hold with-profits policies with Scottish Widows, the maturity values of these policies have fallen again; despite the recovery of equity markets.
The value of an average 25-year with-profits contract has dropped in the past six months, rather worrying given the fact that the stock market has been rising.
Scottish Widows said that payouts were lower because funds were invested over different time periods, yielding different earnings.
It still expects its £18BN with-profits fund to produce a pre-tax investment return of 15% in the 12 months to end-June, compared to 7.3% in the same period the previous year.
However, the company warned that maturity payouts could continue to fall, even in years where positive investment returns were achieved.
The Widows have tried to explain the reason for the fall as being due to the returns on with-profits, which aim to smooth payouts by holding back some of the return in good years to pay out in the bad, as being historically "significantly higher" than those of late.
To my simple view that means that they were paying out too much in earlier years, and not applying the "smoothing principle" properly.
Now there are two possible reasons for this:
1 Poor management of the policy
2 Deliberate over payment to attract new customers and shareholders
A typical 25-year endowment with Scottish Widows, maturing on 1 August, dropped 2.8% on February and 7.4% on the year. A mortgage-linked endowment over the same period fell 2.8% in value since February and 8.1% over the past year.
Bad news for those of you who hold with-profits policies with Scottish Widows, the maturity values of these policies have fallen again; despite the recovery of equity markets.
The value of an average 25-year with-profits contract has dropped in the past six months, rather worrying given the fact that the stock market has been rising.
Scottish Widows said that payouts were lower because funds were invested over different time periods, yielding different earnings.
It still expects its £18BN with-profits fund to produce a pre-tax investment return of 15% in the 12 months to end-June, compared to 7.3% in the same period the previous year.
However, the company warned that maturity payouts could continue to fall, even in years where positive investment returns were achieved.
The Widows have tried to explain the reason for the fall as being due to the returns on with-profits, which aim to smooth payouts by holding back some of the return in good years to pay out in the bad, as being historically "significantly higher" than those of late.
To my simple view that means that they were paying out too much in earlier years, and not applying the "smoothing principle" properly.
Now there are two possible reasons for this:
1 Poor management of the policy
2 Deliberate over payment to attract new customers and shareholders
A typical 25-year endowment with Scottish Widows, maturing on 1 August, dropped 2.8% on February and 7.4% on the year. A mortgage-linked endowment over the same period fell 2.8% in value since February and 8.1% over the past year.
Thursday, July 21, 2005
Endowment Complaints Rise In Scotland
Endowment Complaints Rise In Scotland
The number of complaints to Scotland's legal watchdog rose by more than a quarter last year, from 395 to 505, arising from the mis-selling of endowment policies.
See The Herald.
The number of complaints to Scotland's legal watchdog rose by more than a quarter last year, from 395 to 505, arising from the mis-selling of endowment policies.
See The Herald.
Monday, July 18, 2005
Complain Now
Complain Now
Research carried out by the Financial Services Authority (FSA) shows that over a million households feel they have a case for making a complaint for mis-selling, in relation to their useless and underperforming endowment policy.
However, they haven't yet done so.
Come on people, get off your backsides and take action!
Make the life assurance companies pay for their mismanagement of your money.
Research carried out by the Financial Services Authority (FSA) shows that over a million households feel they have a case for making a complaint for mis-selling, in relation to their useless and underperforming endowment policy.
However, they haven't yet done so.
Come on people, get off your backsides and take action!
Make the life assurance companies pay for their mismanagement of your money.
Monday, July 11, 2005
The Can of Worms
The Can of Worms
It seems that the "dear old" life assurance companies, who manage the underperforming and useless endowment polices that are held by over 8 million people, are not content with the damage that these products have done to their reputations.
As if to further dig the knife deeper into this self inflicted wound, some of them are not spelling out clearly enough the time bar deadline on their "red warning letters".
That is at least the view of solicitors Beresfords, from Doncaster, who say that many "red letters" are failing to give adequate warning to policy holders about the time deadline for complaining.
Beresfords is preparing a report on the time limit issue to send to the Financial Ombudsman Service (FOS), and the insurers which sold endowments. They state that up to half of the red warning letters do not identify the deadline.
Martin Ryan, the firm's compliance and regulation officer, is quoted as saying:
"In 50 per cent of cases there don't appear to be valid time bars..There seem to have been a lot of incorrect red letters going out - specifically not drawing the attention of the client to take action or setting no date by which action had to be taken."
Some insurers, ever mindful of their obligations to themselves, are using time bars as a blanket reason not to examine complaints sent to them.
The FSA will hold a meeting of industry bodies, this Friday, to discuss proposals on endowment compensation. It is expected to present research on how claims have been handled, which is believed to cast financial advisers and insurers in a poor light.
It is very clear that the life assurance industry is "closing ranks" on this issue, and will do everything it can to avoid facing the unpalatable truth that it has sold a product that was not fit for purpose.
Endowment polices, that are meant to pay off mortgages, do not work.
It is as simple as that.
As such the life assurance companies should underwrite them.
The life assurance companies whilst trying to bury their heads, and the heads of their policy holders, in the sand over this disgrace will face rather rude shock.
Raymond Donn, senior partner of law firm Donns in Manchester, is quoted as saying:
"We intend to challenge the time bars when the insurance companies start invoking them next year. A lot of people who have mortgages don't know if there is going to be a shortfall."
Martin Ryan, of Beresfords, believes that the industry will try to avoid precedents being set in court.
"At the moment we are talking of industry-imposed time bars..But if a judge got into it, a can of worms could open up for the industry. It would be the first time a judge ran the rule over it. And the industry could find that, in some areas, they might not be able to use time bars at all."
The life assurance industry is learning, whether it likes it or not, that reputations are hard to earn, but easy to squander.
It seems that the "dear old" life assurance companies, who manage the underperforming and useless endowment polices that are held by over 8 million people, are not content with the damage that these products have done to their reputations.
As if to further dig the knife deeper into this self inflicted wound, some of them are not spelling out clearly enough the time bar deadline on their "red warning letters".
That is at least the view of solicitors Beresfords, from Doncaster, who say that many "red letters" are failing to give adequate warning to policy holders about the time deadline for complaining.
Beresfords is preparing a report on the time limit issue to send to the Financial Ombudsman Service (FOS), and the insurers which sold endowments. They state that up to half of the red warning letters do not identify the deadline.
Martin Ryan, the firm's compliance and regulation officer, is quoted as saying:
"In 50 per cent of cases there don't appear to be valid time bars..There seem to have been a lot of incorrect red letters going out - specifically not drawing the attention of the client to take action or setting no date by which action had to be taken."
Some insurers, ever mindful of their obligations to themselves, are using time bars as a blanket reason not to examine complaints sent to them.
The FSA will hold a meeting of industry bodies, this Friday, to discuss proposals on endowment compensation. It is expected to present research on how claims have been handled, which is believed to cast financial advisers and insurers in a poor light.
It is very clear that the life assurance industry is "closing ranks" on this issue, and will do everything it can to avoid facing the unpalatable truth that it has sold a product that was not fit for purpose.
Endowment polices, that are meant to pay off mortgages, do not work.
It is as simple as that.
As such the life assurance companies should underwrite them.
The life assurance companies whilst trying to bury their heads, and the heads of their policy holders, in the sand over this disgrace will face rather rude shock.
Raymond Donn, senior partner of law firm Donns in Manchester, is quoted as saying:
"We intend to challenge the time bars when the insurance companies start invoking them next year. A lot of people who have mortgages don't know if there is going to be a shortfall."
Martin Ryan, of Beresfords, believes that the industry will try to avoid precedents being set in court.
"At the moment we are talking of industry-imposed time bars..But if a judge got into it, a can of worms could open up for the industry. It would be the first time a judge ran the rule over it. And the industry could find that, in some areas, they might not be able to use time bars at all."
The life assurance industry is learning, whether it likes it or not, that reputations are hard to earn, but easy to squander.
Monday, July 04, 2005
Time To Sue
Time To Sue
It seems that the life assurance industry is guilty of a "being economical with the truth" in trying to persuade their hapless policy holders that once the time bar is down, they have no further rights to claim compensation.
The Observer reports that endowment policy holders still have the right to sue the life assurance companies in the courts.
Not surprisingly the life assurance industry, the same people who sold and mis-managed these useless products, is reluctant to remind people of their rights to sue.
Lawyer Adam Samuel, formerly the Personal Investment Authority Ombudsman, is quoted as saying:
"If anyone took one of these cases to court, the consumer would very probably win. The industry is terrified of this."
The life assurance industry is loath to allow a legal precedent to be set, that could cost billions.
As I have repeated many times on this site, what is actually needed is for there to be a class action taken by the 8 million holders of these useless, underperforming, products.
That will be the most efficient, and effective, method of ensuring that the life assurance industry addresses the failure and mismanagement of these products.
It seems that the life assurance industry is guilty of a "being economical with the truth" in trying to persuade their hapless policy holders that once the time bar is down, they have no further rights to claim compensation.
The Observer reports that endowment policy holders still have the right to sue the life assurance companies in the courts.
Not surprisingly the life assurance industry, the same people who sold and mis-managed these useless products, is reluctant to remind people of their rights to sue.
Lawyer Adam Samuel, formerly the Personal Investment Authority Ombudsman, is quoted as saying:
"If anyone took one of these cases to court, the consumer would very probably win. The industry is terrified of this."
The life assurance industry is loath to allow a legal precedent to be set, that could cost billions.
As I have repeated many times on this site, what is actually needed is for there to be a class action taken by the 8 million holders of these useless, underperforming, products.
That will be the most efficient, and effective, method of ensuring that the life assurance industry addresses the failure and mismanagement of these products.
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.
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".
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.
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.
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.
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