Standard Life Ignore Policy Holders
Standard Life treated their endowment policy holders with contempt today, at its first annual general meeting.
Standard Life faced repeated calls to specify the aggregate level of the shortfall on endowment policies, which they refused to reveal.
Sandy Crombie, the Group CEO, admitted that shortfalls on endowments exceeded the staggering figure of £1.3BN that the insurer had identified in its now-closed Heritage with profits fund.
However, the company didn't make any firm pledge to calculate the overall shortfalls faced by policyholders.
Seemingly the expectations of policy holders are, in the words of outgoing chairman Brian Stewart "unreasonable".
Crombie added:
"We cannot generate money that is not there. We are trying exceptionally hard to make sure the fund continues to perform for those who are invested in it."
Hardly much comfort for the hapless policy holders.
Why not come clean with them?
Tuesday, May 29, 2007
Thursday, May 24, 2007
Endowment Complaints Tailing Off
Endowment Complaints Tailing Off
In its annual review, the Financial Ombudsman Service (FOS) said that endowment complaints are tailing off.
Last year's review reported 69,149 endowment problems, while this year the figure had fallen to 46,134.
Chief ombudsman, Walter Merricks, said:
"This year marked the completion of over 500,000 financial disputes by the FOS since we were set up in 2001. Half of these complaints have involved mortgage endowments, although the record numbers of these cases is now at last decreasing, as we had predicted was likely to happen."
That does not of course mean that the problem is resolved, or indeed has gone away.
Many endowments were a "crock" form start to finish!
In its annual review, the Financial Ombudsman Service (FOS) said that endowment complaints are tailing off.
Last year's review reported 69,149 endowment problems, while this year the figure had fallen to 46,134.
Chief ombudsman, Walter Merricks, said:
"This year marked the completion of over 500,000 financial disputes by the FOS since we were set up in 2001. Half of these complaints have involved mortgage endowments, although the record numbers of these cases is now at last decreasing, as we had predicted was likely to happen."
That does not of course mean that the problem is resolved, or indeed has gone away.
Many endowments were a "crock" form start to finish!
Monday, May 14, 2007
The List of Shame
The List of Shame
Those of us who are unfortunate enough to have bought an endowment policy in the late 1980's and early 1990's may find an analysis produced by Money Management to be of interest.
It shows that, despite rising stock markets, payouts to policy holder continue to fall in most cases.
They compared policies maturing in 2007 with those maturing in 2006, for a male non smoker investing £50 from the outset over 25 years. The variation in returns was staggering. The average growth rate was 8.5%.
The top performer was Reliance Mutual with a return of 13.6%. However, the laggards showing below average returns were as follows (%):
Norwich Union - 8.3
Canada Life - 8.3
CGU - 8.2
General Accident - 8.2
Brittanic Assurance - 8.2
Clerical Medical - 7.9
Legal&General - 7.7
Scottish Widows - 7.3
Scottish Life - 7.2
Standard Mutual - 6.8
Scottish Mutual - 6.8
Friends Provident - 6.7
Equitable Life - 6.5
Eagle Star - 5.7
Well done!
The key question that policy holders should be asking of their endowment company, if they are in one of the under performing ones, is why are your returns worse than others?
Does that not reflect badly on the quality of management, and on the charges levied against the fund?
Those of us who are unfortunate enough to have bought an endowment policy in the late 1980's and early 1990's may find an analysis produced by Money Management to be of interest.
It shows that, despite rising stock markets, payouts to policy holder continue to fall in most cases.
They compared policies maturing in 2007 with those maturing in 2006, for a male non smoker investing £50 from the outset over 25 years. The variation in returns was staggering. The average growth rate was 8.5%.
The top performer was Reliance Mutual with a return of 13.6%. However, the laggards showing below average returns were as follows (%):
Norwich Union - 8.3
Canada Life - 8.3
CGU - 8.2
General Accident - 8.2
Brittanic Assurance - 8.2
Clerical Medical - 7.9
Legal&General - 7.7
Scottish Widows - 7.3
Scottish Life - 7.2
Standard Mutual - 6.8
Scottish Mutual - 6.8
Friends Provident - 6.7
Equitable Life - 6.5
Eagle Star - 5.7
Well done!
The key question that policy holders should be asking of their endowment company, if they are in one of the under performing ones, is why are your returns worse than others?
Does that not reflect badly on the quality of management, and on the charges levied against the fund?
Wednesday, May 09, 2007
Standard Life
Standard Life
Congratulations to Standard Life on their bumper first quarter results, worldwide sales rose by 40% to £3.92BN.
The question that the endowment policy holders are asking is, whether these bumper results will be reflected in bumper returns on their flagging endowment policies.
Highly unlikely I would say, as since July 2006 the masters of Standard Life are the shareholders not the policy holders.
Congratulations to Standard Life on their bumper first quarter results, worldwide sales rose by 40% to £3.92BN.
The question that the endowment policy holders are asking is, whether these bumper results will be reflected in bumper returns on their flagging endowment policies.
Highly unlikely I would say, as since July 2006 the masters of Standard Life are the shareholders not the policy holders.
Monday, April 23, 2007
Bridging Loans
As thousands of underfunded endowment policies start coming to the end of their lives, the demand for bridging loans is expected to rise; as people struggle to make up the shortfall on their under performing endowment policies.
Bridging loans are a very expensive way of borrowing, with monthly rates of between 1.5% to 2% (akin to credit cards).
People should exercise due care when thinking of taking out one of these expensive products.
Bridging loans are a very expensive way of borrowing, with monthly rates of between 1.5% to 2% (akin to credit cards).
People should exercise due care when thinking of taking out one of these expensive products.
Monday, March 26, 2007
Sacked By Text
Cheshireonline reports that police had to be called after a Chester businessman sacked his workers by mobile phone text message.
"Lee Wilson, MD of Stanley Porters and Co Ltd, texted staff at 7.45am on Wednesday, with the words: 'Due to the lack of professionalism and poor overall performance of the Chester office, i hav no option but to let u go.
'Ur pay wil be calculated and paid on pay day. U are not required to go into the office. All belongings wil be sent to u.'
But the four workers, whose job was to win compensation for home owners who had been mis-sold endowment mortgages, collected their belongings from the Union Street offices and asked for the attendance of police to prevent trouble."
"Lee Wilson, MD of Stanley Porters and Co Ltd, texted staff at 7.45am on Wednesday, with the words: 'Due to the lack of professionalism and poor overall performance of the Chester office, i hav no option but to let u go.
'Ur pay wil be calculated and paid on pay day. U are not required to go into the office. All belongings wil be sent to u.'
But the four workers, whose job was to win compensation for home owners who had been mis-sold endowment mortgages, collected their belongings from the Union Street offices and asked for the attendance of police to prevent trouble."
Monday, March 19, 2007
Standard Life
Standard Life
In rather a curate's egg development, Standard Life is due to write to its 750,000 endowment policy holders informing them that their endowments may not pay off their mortgages.
However, Standard Life will attempt to sugar the unpleasant pill by telling its hapless policy holders that the shortfall may not be as bad as it was anticipated a year ago.
So that's alright then!
It is estimated that around 90% of Standard Life's policies are not on target to meet the debt that they were meant to cover.
A Standard Life spokesman said:
"For many customers, a small shortfall will not present a problem, as these consumers have already paid off the mortgage, and were holding on to their policies for savings purposes. Others may be fully aware of the position of their contract, but have other savings to make up the shortfall, and so be comfortable with the situation."
I find the logic of the above to be highly dubious. Was not the point of taking these useless policies out to cover the mortgage?
Therefore how can a policy holder be "comfortable" with a shortfall?
In rather a curate's egg development, Standard Life is due to write to its 750,000 endowment policy holders informing them that their endowments may not pay off their mortgages.
However, Standard Life will attempt to sugar the unpleasant pill by telling its hapless policy holders that the shortfall may not be as bad as it was anticipated a year ago.
So that's alright then!
It is estimated that around 90% of Standard Life's policies are not on target to meet the debt that they were meant to cover.
A Standard Life spokesman said:
"For many customers, a small shortfall will not present a problem, as these consumers have already paid off the mortgage, and were holding on to their policies for savings purposes. Others may be fully aware of the position of their contract, but have other savings to make up the shortfall, and so be comfortable with the situation."
I find the logic of the above to be highly dubious. Was not the point of taking these useless policies out to cover the mortgage?
Therefore how can a policy holder be "comfortable" with a shortfall?
Thursday, March 01, 2007
HBOS Profits
HBOS Profits
Congratulations to HBOS, which has announced a 26% rise in profits for 2006 to £2.12BN.
This despite that fact that last year HBOS had to set aside a £95MN provision for compensation related to customer complaints over the bank's sale of endowment mortgages.
Congratulations to HBOS, which has announced a 26% rise in profits for 2006 to £2.12BN.
This despite that fact that last year HBOS had to set aside a £95MN provision for compensation related to customer complaints over the bank's sale of endowment mortgages.
Tuesday, January 23, 2007
Insurers Cash Grab
Insurers Cash Grab
Aviva and Prudential are planning to divert billions of pounds of surplus cash in their with-profits funds to shareholders, despite the fact that those who hold endowments, bonds and pensions are suffering lousy returns.
Aviva own Norwich Union, which recently warned 90% of its endowment policy holders to expect shortfalls on their policies. Aviva wants to pass a large part of the £4BN of inherited estate, in its Commercial Union Life and CGNU Life with-profits funds, to shareholders in 2008.
It is estimated that 1.4m policyholders will each received several hundreds of pounds of compensation. However, Which? believes that they are entitled to over £2K.
Doug Taylor at Which is quoted in The Times as saying:
"The fair solution would be to give 90% to policyholders and 10% to shareholders, even if this is not Norwich Union's preferred result."
Patrick Connolly at JS&P Towry Law, said:
"Norwich Union doesn't want to release the funds to benefit policyholders but because it wants to use them to support the business and boost shareholders' profits."
Prudential also wants to pass on £9BN billion from the inherited estate to shareholders.
These moves are expected to encourage other insurers to do the same, in order to prop up their share prices and to keep the shareholders quiet and subservient.
David Riddington, a senior actuary for Norwich Union, said:
"The inherited estate is legally owned by the company and its shareholders, so policyholders don't have any rights as such. Payments to customers are likely to be comparatively modest."
Ian Allison at Brunel Franklin, said:
"We are astonished that Norwich Union sees fit to attribute some of its surplus to shareholders while many endowment victims' finances remain in tatters."
Clare Spottiswoode has been appointed as "policyholder advocate", by Norwich.
The Policyholder Advocate is the representative for all the eligible with-profits policyholders of a company that is considering a reattribution of inherited estates.
The Policyholder Advocate's key job is to negotiate the size of any incentive to withy-profits policyholders to give up their rights to any possible future distribution from the inherited estate.
Details about Spottiswoode can be found on the website www.policyholderadvocate.org.
The outcome of these two moves will impact the rest of the industry, and the finances of the long suffering endowment policy holders.
Aviva and Prudential are planning to divert billions of pounds of surplus cash in their with-profits funds to shareholders, despite the fact that those who hold endowments, bonds and pensions are suffering lousy returns.
Aviva own Norwich Union, which recently warned 90% of its endowment policy holders to expect shortfalls on their policies. Aviva wants to pass a large part of the £4BN of inherited estate, in its Commercial Union Life and CGNU Life with-profits funds, to shareholders in 2008.
It is estimated that 1.4m policyholders will each received several hundreds of pounds of compensation. However, Which? believes that they are entitled to over £2K.
Doug Taylor at Which is quoted in The Times as saying:
"The fair solution would be to give 90% to policyholders and 10% to shareholders, even if this is not Norwich Union's preferred result."
Patrick Connolly at JS&P Towry Law, said:
"Norwich Union doesn't want to release the funds to benefit policyholders but because it wants to use them to support the business and boost shareholders' profits."
Prudential also wants to pass on £9BN billion from the inherited estate to shareholders.
These moves are expected to encourage other insurers to do the same, in order to prop up their share prices and to keep the shareholders quiet and subservient.
David Riddington, a senior actuary for Norwich Union, said:
"The inherited estate is legally owned by the company and its shareholders, so policyholders don't have any rights as such. Payments to customers are likely to be comparatively modest."
Ian Allison at Brunel Franklin, said:
"We are astonished that Norwich Union sees fit to attribute some of its surplus to shareholders while many endowment victims' finances remain in tatters."
Clare Spottiswoode has been appointed as "policyholder advocate", by Norwich.
The Policyholder Advocate is the representative for all the eligible with-profits policyholders of a company that is considering a reattribution of inherited estates.
The Policyholder Advocate's key job is to negotiate the size of any incentive to withy-profits policyholders to give up their rights to any possible future distribution from the inherited estate.
Details about Spottiswoode can be found on the website www.policyholderadvocate.org.
The outcome of these two moves will impact the rest of the industry, and the finances of the long suffering endowment policy holders.
Friday, January 12, 2007
Norwich Issues Red Alert
Norwich Issues Red Alert
Norwich Union has given its hapless endowment policy holders an unwelcome New Year present, by categorising nearly 90% of its 750,000 mortgage endowments as being in the "Red" category.
The red alert means that policyholders need to take urgent action, to avoid shortfalls on their home loans.
Norwich Union stated that 89.5% of endowment holders had been placed in the 'red' category, this is a staggering rise of 72% from last year.
Last year Norwich Union categorised 7% of its endowment policyholders as green and 21% amber.
David Riddington, senior actuary for Norwich Union, said:
"We didn't think amber was adding a lot. What we want, and what the FSA wants, is if people aren't on green, they should really think about the position they're in and decide whether to take action.
What happened with the amber is it perhaps lulled people into not doing anything, so this is a way to get people to at least sit up and take notice."
A fair and honest point, in my view, which in effect makes a mockery of the FSA's three coloured traffic light system.
The average shortfall projected by Norwich Union for 2007 is £1,400.
As I keep repeating, all of this heartache, wasted time and money could be avoided if the life assurance industry "bit the bullet" and underwrote these useless underperforming products.
Norwich Union has given its hapless endowment policy holders an unwelcome New Year present, by categorising nearly 90% of its 750,000 mortgage endowments as being in the "Red" category.
The red alert means that policyholders need to take urgent action, to avoid shortfalls on their home loans.
Norwich Union stated that 89.5% of endowment holders had been placed in the 'red' category, this is a staggering rise of 72% from last year.
Last year Norwich Union categorised 7% of its endowment policyholders as green and 21% amber.
David Riddington, senior actuary for Norwich Union, said:
"We didn't think amber was adding a lot. What we want, and what the FSA wants, is if people aren't on green, they should really think about the position they're in and decide whether to take action.
What happened with the amber is it perhaps lulled people into not doing anything, so this is a way to get people to at least sit up and take notice."
A fair and honest point, in my view, which in effect makes a mockery of the FSA's three coloured traffic light system.
The average shortfall projected by Norwich Union for 2007 is £1,400.
As I keep repeating, all of this heartache, wasted time and money could be avoided if the life assurance industry "bit the bullet" and underwrote these useless underperforming products.
Thursday, January 11, 2007
The Manx Black Hole
The Manx Black Hole
Those of you in the UK with underperforming endowment mortgages, who feel that they have been given the wrong end of a very unpleasant stick, should spare a thought for those endowment mortgage holders resident in the Isle of Man.
Reports from the Isle of Man indicate that there is a legislative black hole there, relating to the mis-selling of investment products.
A discrepancy in legislation has been highlighted, which means that the Manx ombudsman's power only applies to policies sold after April 20 1999, some 11 years later than the UK.
What a mess!
Those of you in the UK with underperforming endowment mortgages, who feel that they have been given the wrong end of a very unpleasant stick, should spare a thought for those endowment mortgage holders resident in the Isle of Man.
Reports from the Isle of Man indicate that there is a legislative black hole there, relating to the mis-selling of investment products.
A discrepancy in legislation has been highlighted, which means that the Manx ombudsman's power only applies to policies sold after April 20 1999, some 11 years later than the UK.
What a mess!
Tuesday, December 12, 2006
Extra Compensation Won
Extra Compensation Won
The Financial Services Authority (FSA) claims that due to its pressure, life assurance companies and others involved in the most notorious financial scandal in recent British history, have been forced to pay compensation to over 100,000 customers whose endowment mis-selling complaints had previously been rejected.
The FSA claims that due to its pressure, 75% of the rejected claims have so far been decided in favour of the customers.
This represents around an extra £120m in compensation.
Vernon Everitt from the FSA gave warning to the financial services industry that the FSA would be keeping a very close eye on how the firms were operating.
Quote:
"It is encouraging that firms have improved the speed and quality of how they handle complaints.
News of a potential shortfall is a major worry for consumers and firms owe it to them to deal with their complaints quickly and fairly.
They need to pay particular attention to helping people deal with shortfalls when policies mature."
Around 1.8 million people have received compensation for mis-sold underperforming useless endowment products, totalling £2.7BN.
The FSA should be wary of indulging in too much self congratulations. Millions of people are still facing a shortfall on their endowment policy, with little idea of how they are going to cover their mortgage debt.
The life assurance industry could put a stop to this chaos now, by agreeing to underwrite these useless underperforming products. Instead they are more than happy to pass the buck to others.
The Financial Services Authority (FSA) claims that due to its pressure, life assurance companies and others involved in the most notorious financial scandal in recent British history, have been forced to pay compensation to over 100,000 customers whose endowment mis-selling complaints had previously been rejected.
The FSA claims that due to its pressure, 75% of the rejected claims have so far been decided in favour of the customers.
This represents around an extra £120m in compensation.
Vernon Everitt from the FSA gave warning to the financial services industry that the FSA would be keeping a very close eye on how the firms were operating.
Quote:
"It is encouraging that firms have improved the speed and quality of how they handle complaints.
News of a potential shortfall is a major worry for consumers and firms owe it to them to deal with their complaints quickly and fairly.
They need to pay particular attention to helping people deal with shortfalls when policies mature."
Around 1.8 million people have received compensation for mis-sold underperforming useless endowment products, totalling £2.7BN.
The FSA should be wary of indulging in too much self congratulations. Millions of people are still facing a shortfall on their endowment policy, with little idea of how they are going to cover their mortgage debt.
The life assurance industry could put a stop to this chaos now, by agreeing to underwrite these useless underperforming products. Instead they are more than happy to pass the buck to others.
Thursday, December 07, 2006
Naive
Naive
Research carried out by the Financial Services Consumer Panel indicates that consumers are using mortgage endowment claims companies to save time, and help them through what they see as a complex process.
The research also claims that around 66% of successful claimants believe that they have received value for money from mortgage endowment claims firms. Given that the claim firms usually charge between 20%-30% of the compensation recovered, for work that the claimant usually do himself, this "value for money" seems to be a somewhat misguided belief.
Even more bizarrely, 25% of those who were unsuccessful said that they would definitely recommend the services of a mortgage endowment claims firm.
Given the alarmingly naivety of the respondents, it is hardly surprising that the financial services industry make such "hansom" profits out of the British public year in year out.
John Howard, chairman of the Financial Services Consumer Panel said:
"Some consumers seem quite prepared to pay part of their compensation to a claims firm, especially when the alternative is to receive no compensation at all, because they do not have the time or the confidence to pursue a claim themselves.
It is not clear the claim firms save consumers that much time and there was dissatisfaction with some aspects of the service provided by some firms; not giving details about the fees up front, and poor service in telling clients when the claim was not successful. This needs to be considered as the government starts to regulate this arena through the Department of Constitutional Affairs."
Quite why this is a DCA matter is beyond me, as it clearly comes under the FSA's and Treasury's remit.
Research carried out by the Financial Services Consumer Panel indicates that consumers are using mortgage endowment claims companies to save time, and help them through what they see as a complex process.
The research also claims that around 66% of successful claimants believe that they have received value for money from mortgage endowment claims firms. Given that the claim firms usually charge between 20%-30% of the compensation recovered, for work that the claimant usually do himself, this "value for money" seems to be a somewhat misguided belief.
Even more bizarrely, 25% of those who were unsuccessful said that they would definitely recommend the services of a mortgage endowment claims firm.
Given the alarmingly naivety of the respondents, it is hardly surprising that the financial services industry make such "hansom" profits out of the British public year in year out.
John Howard, chairman of the Financial Services Consumer Panel said:
"Some consumers seem quite prepared to pay part of their compensation to a claims firm, especially when the alternative is to receive no compensation at all, because they do not have the time or the confidence to pursue a claim themselves.
It is not clear the claim firms save consumers that much time and there was dissatisfaction with some aspects of the service provided by some firms; not giving details about the fees up front, and poor service in telling clients when the claim was not successful. This needs to be considered as the government starts to regulate this arena through the Department of Constitutional Affairs."
Quite why this is a DCA matter is beyond me, as it clearly comes under the FSA's and Treasury's remit.
Saturday, December 02, 2006
Legal Loophole Helps Scots
Legal Loophole Helps Scots
An estimated 100,000 Scots homeowners, who missed the deadline for lodging endowment mis-selling claims, may still be eligible for compensation.
That at least is the view of Gerry Diamond, of the Endowment Compensation Centre, who has discovered a possible legal loophole which may help those who bought policies from Scottish providers including; Standard Life, Scottish Widows and Scottish Amicable.
Mr Diamond believes that the tree year time limit imposed by the Financial services Authority (FSA) is illegal in Scotland, because Scots law allows five years to challenge unfair contracts.
Quote:
"This means that people should have two more years to claim than the three-year FSA rule that is currently applied by many sellers of endowment policies."
It is estimated that over 400,000 Scots have been mis-sold endowment policies.
As I keep saying, all of this trouble could be stopped here and now if the life assurance companies "stepped up to the plate" and underwrote these useless underperforming products.
An estimated 100,000 Scots homeowners, who missed the deadline for lodging endowment mis-selling claims, may still be eligible for compensation.
That at least is the view of Gerry Diamond, of the Endowment Compensation Centre, who has discovered a possible legal loophole which may help those who bought policies from Scottish providers including; Standard Life, Scottish Widows and Scottish Amicable.
Mr Diamond believes that the tree year time limit imposed by the Financial services Authority (FSA) is illegal in Scotland, because Scots law allows five years to challenge unfair contracts.
Quote:
"This means that people should have two more years to claim than the three-year FSA rule that is currently applied by many sellers of endowment policies."
It is estimated that over 400,000 Scots have been mis-sold endowment policies.
As I keep saying, all of this trouble could be stopped here and now if the life assurance companies "stepped up to the plate" and underwrote these useless underperforming products.
Monday, November 20, 2006
Compensation Payments Stalled
Compensation Payments Stalled
It seems that, according to endowment claims company Brunel Franklin, consumers who were mis-sold underperforming and useless endowment policies are being kept waiting weeks/months for their compensation cheques to arrive.
Why?
Seemingly the financial institutions are struggling to cope with a flood of complaints, and some are stalling payouts to successful claimants.
Ian Allison, claims director for Brunel Franklin, said:
"It is wholly unreasonable to wait two months or more for your compensation payout when the figures have already been agreed and the offer accepted by the client. At this point there is no reason why the claim can't be settled within a few days."
It is hardly surprising that the financial services industry in Britain has such a lousy reputation, and that the ordinary man in the street no longer has any trust in it.
It is also worth noting that many in the financial services industry in the City will enjoy massive six figure bonuses this year end. Maybe they would like to use some of their windfalls to help out those who will be suffering shortfalls on their endowment polices?
Yes, that will happen!
It seems that, according to endowment claims company Brunel Franklin, consumers who were mis-sold underperforming and useless endowment policies are being kept waiting weeks/months for their compensation cheques to arrive.
Why?
Seemingly the financial institutions are struggling to cope with a flood of complaints, and some are stalling payouts to successful claimants.
Ian Allison, claims director for Brunel Franklin, said:
"It is wholly unreasonable to wait two months or more for your compensation payout when the figures have already been agreed and the offer accepted by the client. At this point there is no reason why the claim can't be settled within a few days."
It is hardly surprising that the financial services industry in Britain has such a lousy reputation, and that the ordinary man in the street no longer has any trust in it.
It is also worth noting that many in the financial services industry in the City will enjoy massive six figure bonuses this year end. Maybe they would like to use some of their windfalls to help out those who will be suffering shortfalls on their endowment polices?
Yes, that will happen!
Monday, November 13, 2006
The Endowment Mortgage Crisis
The Endowment Mortgage Crisis
It is not with any exaggeration that the mis-selling of mortgage endowment policies is being described by many as the worst financial scandal in Britain of the last 30 years.
However, quite disgustingly the life assurance industry has done its best to wipe it hands of the matter; by trying to apportion blame on those who took out these useless underperforming products.
It is estimated that around 2.2 million people are facing shortfalls averaging £7,000.
The average payout on a £50 monthly 25-year policy has halved from £98,000 in 1992 to just £48,000 today.
Companies guilty of mis-selling have already paid out 2.3BN in compensation to over 1.5 million people.
The House of Commons Treasury Select Committee conducted an investigation into mortgage endowment mis-selling and issued a damning indictment of the industry.
The Chairman, John McFall, said:
"The effects of mortgage endowment mis-selling will be felt for at least another 10 years as these policies fall due for repayment.
It is absolutely vital that homebuyers who were mis-sold lodge a claim for compensation before the time bars come down.
Otherwise they will have even greater difficulty coping with payment shortfalls.
The lesson for the financial services industry is to be always simple and straightforward in its future dealings with the public.
I hope that going forward they have learned from this cathartic experience."
The lesson has clearly not been learned, as the life assurance industry is refusing to do the one thing that would restore people's faith in it, and eliminate the crisis that is causing misery to millions, namely underwrite these useless products.
It is not with any exaggeration that the mis-selling of mortgage endowment policies is being described by many as the worst financial scandal in Britain of the last 30 years.
However, quite disgustingly the life assurance industry has done its best to wipe it hands of the matter; by trying to apportion blame on those who took out these useless underperforming products.
It is estimated that around 2.2 million people are facing shortfalls averaging £7,000.
The average payout on a £50 monthly 25-year policy has halved from £98,000 in 1992 to just £48,000 today.
Companies guilty of mis-selling have already paid out 2.3BN in compensation to over 1.5 million people.
The House of Commons Treasury Select Committee conducted an investigation into mortgage endowment mis-selling and issued a damning indictment of the industry.
The Chairman, John McFall, said:
"The effects of mortgage endowment mis-selling will be felt for at least another 10 years as these policies fall due for repayment.
It is absolutely vital that homebuyers who were mis-sold lodge a claim for compensation before the time bars come down.
Otherwise they will have even greater difficulty coping with payment shortfalls.
The lesson for the financial services industry is to be always simple and straightforward in its future dealings with the public.
I hope that going forward they have learned from this cathartic experience."
The lesson has clearly not been learned, as the life assurance industry is refusing to do the one thing that would restore people's faith in it, and eliminate the crisis that is causing misery to millions, namely underwrite these useless products.
Tuesday, November 07, 2006
Another Scandal In The Making
Another Scandal In The Making
The FT reports that first-time buyers and others are taking out interest-only mortgages, with no identified means of capital repayment.
This leaves them dangerously exposed to financial calamity, or being forced to trade down the property ladder to pay off their mortgage.
The increase in interest-only home loans has led to fears of another endowment style mis-selling scandal.
The Financial Services Authority (FSA) has noted that interest-only mortgages are one of the top "emerging retail risks" and drew attention to "an increasing number of mortgages.. with the lender not recording that there was a linked repayment vehicle in place".
People are in danger of mortgaging their future, without any hope of paying off the debt. A very foolish thing to do.
The FT reports that first-time buyers and others are taking out interest-only mortgages, with no identified means of capital repayment.
This leaves them dangerously exposed to financial calamity, or being forced to trade down the property ladder to pay off their mortgage.
The increase in interest-only home loans has led to fears of another endowment style mis-selling scandal.
The Financial Services Authority (FSA) has noted that interest-only mortgages are one of the top "emerging retail risks" and drew attention to "an increasing number of mortgages.. with the lender not recording that there was a linked repayment vehicle in place".
People are in danger of mortgaging their future, without any hope of paying off the debt. A very foolish thing to do.
Thursday, October 19, 2006
Endowment Misery Continues
Endowment Misery Continues
Quite unbelievably, even though endowment mortgages have been shown to be the worst fanancial product ever foisted on the unsuspecting British public in living memory, around 40,000 of these useless underperforming products were sold in the first six months of this year. Even worse, around 100,000 were sold last year.
It beggars belief that, despite the lousy performance and negative publicity surrounding these useless products, people are still prepare to fall for the salesman's patter.
It also beggars belief that life assurance companies have the balls to continue to sell them. Clearly money and profits come before reputation and integrity.
A smooth talking salesman can earn a commission equivalent to the first 18 months' premiums, just for selling the policy. He can then continue to get paid annual commission, as long as the hapless endowment owner continues to keep the plan going.
It is little wonder that many people in Britain have lost confidence in the life assurance industry, and the financial services sector as a whole.
Quite unbelievably, even though endowment mortgages have been shown to be the worst fanancial product ever foisted on the unsuspecting British public in living memory, around 40,000 of these useless underperforming products were sold in the first six months of this year. Even worse, around 100,000 were sold last year.
It beggars belief that, despite the lousy performance and negative publicity surrounding these useless products, people are still prepare to fall for the salesman's patter.
It also beggars belief that life assurance companies have the balls to continue to sell them. Clearly money and profits come before reputation and integrity.
A smooth talking salesman can earn a commission equivalent to the first 18 months' premiums, just for selling the policy. He can then continue to get paid annual commission, as long as the hapless endowment owner continues to keep the plan going.
It is little wonder that many people in Britain have lost confidence in the life assurance industry, and the financial services sector as a whole.
Monday, October 16, 2006
Secret Payments
Secret Payments
It appears that some major financial institutions, that sold the hapless British home owners their useless and underperforming endowment policies, are conducting a secret "payoff" exercise.
Fearful that their already tarnished reputations will be further dragged through the muck and mire, some of Britain's leading financial institutions are paying off endowment holders, so as to avoid fines from the FSA and further reputational damage.
Included on the list of shame are; Barclays, Halifax, Friends Provident and Legal & General. They are reportedly secretly contacting customers, and offering to "review" the way business has been handled.
Pretty pathetic isn't it?
Hardly surprising that people long ago lost faith in the financial services industry in Britain.
It appears that some major financial institutions, that sold the hapless British home owners their useless and underperforming endowment policies, are conducting a secret "payoff" exercise.
Fearful that their already tarnished reputations will be further dragged through the muck and mire, some of Britain's leading financial institutions are paying off endowment holders, so as to avoid fines from the FSA and further reputational damage.
Included on the list of shame are; Barclays, Halifax, Friends Provident and Legal & General. They are reportedly secretly contacting customers, and offering to "review" the way business has been handled.
Pretty pathetic isn't it?
Hardly surprising that people long ago lost faith in the financial services industry in Britain.
Tuesday, October 10, 2006
The Dangers of Interest Only Mortgages
The Dangers of Interest Only Mortgages
As if the endowment selling scandal was not enough for the British housing market and financial system to bear, it seems that we may be heading for another mi-selling scandal of equal proportions.
The FT has published a good article covering the concerns about the latest financial product to be foisted on the unwary first time home buyes, namely interest only mortgages.
Quote:
"First time buyers and cash strapped home owners are scrambling to take out interest only mortgages that could leave them facing financial ruin or forced to trade down the property ladder to pay off their mortgage.
Mortgage lenders' willingness to market interest only home loans has prompted fears that these mortgages could be the cause of the next misselling scandal."
Read the full article here FT.
As if the endowment selling scandal was not enough for the British housing market and financial system to bear, it seems that we may be heading for another mi-selling scandal of equal proportions.
The FT has published a good article covering the concerns about the latest financial product to be foisted on the unwary first time home buyes, namely interest only mortgages.
Quote:
"First time buyers and cash strapped home owners are scrambling to take out interest only mortgages that could leave them facing financial ruin or forced to trade down the property ladder to pay off their mortgage.
Mortgage lenders' willingness to market interest only home loans has prompted fears that these mortgages could be the cause of the next misselling scandal."
Read the full article here FT.
Monday, October 02, 2006
Financial Ombudsman Service Under Pressure
Financial Ombudsman Service Under Pressure
The Financial Ombudsman Service (FOS) is under sever pressure, as it struggles to cope with the 250 endowment complaints that it receives every day.
In theory, according to the FOS, it will deliver a decision on an endowment case within a mind numbingly slow nine months, though complex cases and appealed decisions take longer.
The FOS also claims that an appeal on an FOS decision, should be reviewed in between six to 12 months.
The FOS have recruited 120 more adjudicators and support staff, they now employ 400 people to work on endowment complaints.
As I keep repeating, this whole situation is ridiculous; it could be solved at the stroke of a pen, if the life assurance companies agreed to underwrite these useless underperforming endowment policies.
The Financial Ombudsman Service (FOS) is under sever pressure, as it struggles to cope with the 250 endowment complaints that it receives every day.
In theory, according to the FOS, it will deliver a decision on an endowment case within a mind numbingly slow nine months, though complex cases and appealed decisions take longer.
The FOS also claims that an appeal on an FOS decision, should be reviewed in between six to 12 months.
The FOS have recruited 120 more adjudicators and support staff, they now employ 400 people to work on endowment complaints.
As I keep repeating, this whole situation is ridiculous; it could be solved at the stroke of a pen, if the life assurance companies agreed to underwrite these useless underperforming endowment policies.
Friday, September 29, 2006
Negligence Claims Rise
Negligence Claims Rise
A survey carried out by Alexander Forbes International, notes that claims and notifications against professionals rose sharply, climbing to 603 in 2005-06, from 452 a year earlier.
The largest factor in that rise can be accounted for by claims for incorrect endowment advice, which rose to 20% from 12%.
Executive director Mark Bracher said:
"An increasing number of home owners are finding that their endowment policies will fail to pay off their mortgages and they are seeking recompense from their accountants for negligent advice.
This has been compounded by a number of specialised claims farmers who have made a business of encouraging home owners to seek compensation from their advisers."
This problem would be solved at the stroke of a pen, if the life assurance companies agreed to underwrite these useless underperforming products.
A survey carried out by Alexander Forbes International, notes that claims and notifications against professionals rose sharply, climbing to 603 in 2005-06, from 452 a year earlier.
The largest factor in that rise can be accounted for by claims for incorrect endowment advice, which rose to 20% from 12%.
Executive director Mark Bracher said:
"An increasing number of home owners are finding that their endowment policies will fail to pay off their mortgages and they are seeking recompense from their accountants for negligent advice.
This has been compounded by a number of specialised claims farmers who have made a business of encouraging home owners to seek compensation from their advisers."
This problem would be solved at the stroke of a pen, if the life assurance companies agreed to underwrite these useless underperforming products.
Thursday, September 14, 2006
Nationwide and Portman To Merge
Nationwide and Portman To Merge
Nationwide and Portman building societies announced on Tuesday that they plan to merge. They claim that they intend to provide a "compelling alternative to the big retail banks".
Portman members will receive a booklet explaining the planned merger, before the building society's Spring 2007 AGM. They will be asked to vote on the proposals. Nationwide members do not have anything to do.
If the vote goes in favour of the merger, it is planned to be finalised by September 2007.
Qualifying members of Portman will receive a pre-tax windfall worth a minimum £200, if the merger goes ahead. Only members who had a minimum of £100 in savings, or a balance of £100 on a mortgage, at the close of business on 11 September will qualify.
Nationwide members will not receive a windfall.
Nationwide and Portman building societies announced on Tuesday that they plan to merge. They claim that they intend to provide a "compelling alternative to the big retail banks".
Portman members will receive a booklet explaining the planned merger, before the building society's Spring 2007 AGM. They will be asked to vote on the proposals. Nationwide members do not have anything to do.
If the vote goes in favour of the merger, it is planned to be finalised by September 2007.
Qualifying members of Portman will receive a pre-tax windfall worth a minimum £200, if the merger goes ahead. Only members who had a minimum of £100 in savings, or a balance of £100 on a mortgage, at the close of business on 11 September will qualify.
Nationwide members will not receive a windfall.
Tuesday, September 12, 2006
Gherkin To Gobble Up Pru
Gherkin To Gobble Up Pru
It is reported that Swiss Re, the Swiss financial group known for the Gherkin in London, is to buy a large part of the UK operations of Prudential for around £5BN.
Swiss Re is reported to have offered to buy the closed life fund business of Prudential. The closed funds contain existing insurance policies, but no longer have new policies added to them.
The approach was made last month on the heals of Mark Tucker's, the CEO of Prudential, plans to shake up the Pru's underperforming UK operations.
Prudential's UK closed life book includes with profits policies and endowment mortgages. The value is estimated to be around £5BN.
The approach has raised questions about the Pru's commitment to Britain. There are rumours that some investors are keen for Tucker to scale back in Britain and concentrate on the faster growing business in Asia and the US.
The sale would give the Prudential £1.5BN. The value of with profits policies is split between shareholders and policyholders. Under the sale of a with profits business, shareholders receive a lump sum to account for the future profits they would have received from the policies.
Swiss Re has bought a series of closed life funds in America, and in Britain it bought Life Assurance Holding Corporation.
Nice to see that someone can make money out of the useless and underperforming endowment policies that were foisted on the unwary British public in the 1980's.
It is reported that Swiss Re, the Swiss financial group known for the Gherkin in London, is to buy a large part of the UK operations of Prudential for around £5BN.
Swiss Re is reported to have offered to buy the closed life fund business of Prudential. The closed funds contain existing insurance policies, but no longer have new policies added to them.
The approach was made last month on the heals of Mark Tucker's, the CEO of Prudential, plans to shake up the Pru's underperforming UK operations.
Prudential's UK closed life book includes with profits policies and endowment mortgages. The value is estimated to be around £5BN.
The approach has raised questions about the Pru's commitment to Britain. There are rumours that some investors are keen for Tucker to scale back in Britain and concentrate on the faster growing business in Asia and the US.
The sale would give the Prudential £1.5BN. The value of with profits policies is split between shareholders and policyholders. Under the sale of a with profits business, shareholders receive a lump sum to account for the future profits they would have received from the policies.
Swiss Re has bought a series of closed life funds in America, and in Britain it bought Life Assurance Holding Corporation.
Nice to see that someone can make money out of the useless and underperforming endowment policies that were foisted on the unwary British public in the 1980's.
Wednesday, September 06, 2006
Friends Provident In The Wrong
Friends Provident In The Wrong
In a rare piece of good news, it seems that the thousands of endowment policy holders who have been told that they have run out of time to complain about their useless and underperforming mortgage endowment policies have been offered some hope of compensation.
The Financial Ombudsman Service (FOS) has ruled that Friends Provident was wrong to impose a time limit on an endowment misselling complaint bought by a Mr and Mrs Smith, and has ordered the insurer to reopen their case.
The Smiths are physically disabled, and that has impacted the decisions of the FOS. However, endowment claims and legal specialists reportedly believe that this judgement could impact on all policyholders who have been time barred.
Tim Moore, of EndowmentClaims.com, said:
"This ruling suggests that if policyholders can prove that they were too confused, for whatever reason, to make accurate financial choices that the time bar may be invalid."
Under FSA rules, endowment policyholders who want to complain must do so within three years of receiving a "red" warning letter.
The FOS ruled that the Smiths were too confused to make an accurate decision about their mortgage options, as such the time bar was invalid.
The ombudsman is quoted as saying:
"I take the fact that Mr and Mrs Smith are unable to work as a good indication they may find coping with day to day normal life a challenge, and consider their circumstances are exceptional for the purposes of the mortgage endowment time bar rules."
A "coalition" of endowment claims experts including; Donns Solicitors, Endowmentclaims.com, CPH Financial Advisory Services, Whitehall Randall, and Michael Booth QC is reportedly ready to test whether it can be applied to all policyholders, not just the disabled.
Andrew Hummersone, from Whitehall Randall, said:
"In light of this ruling, our next step will be to send another 10 time barred cases to the FOS.
The minute a claim is rejected we will immediately seek a High Court review, with the aim of confirming once and for all whether time bars have any validity."
As ever with the endowment scandal, the lawyers and claim firms will do very well out of it.
However, as I keep repeating, the best way for all of the parties involved in this disgrace would be for the life assurance companies to do the decent thing and bite the bullet of underwriting these useless underperforming policies.
In a rare piece of good news, it seems that the thousands of endowment policy holders who have been told that they have run out of time to complain about their useless and underperforming mortgage endowment policies have been offered some hope of compensation.
The Financial Ombudsman Service (FOS) has ruled that Friends Provident was wrong to impose a time limit on an endowment misselling complaint bought by a Mr and Mrs Smith, and has ordered the insurer to reopen their case.
The Smiths are physically disabled, and that has impacted the decisions of the FOS. However, endowment claims and legal specialists reportedly believe that this judgement could impact on all policyholders who have been time barred.
Tim Moore, of EndowmentClaims.com, said:
"This ruling suggests that if policyholders can prove that they were too confused, for whatever reason, to make accurate financial choices that the time bar may be invalid."
Under FSA rules, endowment policyholders who want to complain must do so within three years of receiving a "red" warning letter.
The FOS ruled that the Smiths were too confused to make an accurate decision about their mortgage options, as such the time bar was invalid.
The ombudsman is quoted as saying:
"I take the fact that Mr and Mrs Smith are unable to work as a good indication they may find coping with day to day normal life a challenge, and consider their circumstances are exceptional for the purposes of the mortgage endowment time bar rules."
A "coalition" of endowment claims experts including; Donns Solicitors, Endowmentclaims.com, CPH Financial Advisory Services, Whitehall Randall, and Michael Booth QC is reportedly ready to test whether it can be applied to all policyholders, not just the disabled.
Andrew Hummersone, from Whitehall Randall, said:
"In light of this ruling, our next step will be to send another 10 time barred cases to the FOS.
The minute a claim is rejected we will immediately seek a High Court review, with the aim of confirming once and for all whether time bars have any validity."
As ever with the endowment scandal, the lawyers and claim firms will do very well out of it.
However, as I keep repeating, the best way for all of the parties involved in this disgrace would be for the life assurance companies to do the decent thing and bite the bullet of underwriting these useless underperforming policies.
Thursday, August 24, 2006
Berkeley Independent Advisers Network in Default
Berkeley Independent Advisers Network in Default
The Financial Services Compensation Scheme (FSCS) has declared Berkeley Independent Advisers (BIA) network in default, five months after Tenet acquired it for £700K.
The FSCS said that the decision had been made after receiving 300 claims for compensation from individuals, and after being advised by administrators PricewaterhouseCoopers that it did not have sufficient assets to meet the cost of redress.
Consumers will now be able to receive compensation for alleged poor advice from BIA's advisers in relation to endowment mortgages, investment bonds and personal pensions.
All other regulated financial services firms, including other advisers, will cover the bill for compensating former BIA clients through their annual levy to the FSCS.
Questions are being raised as to the speed with which BIA has been declared in default.
As repeated time and time again on this site, if the life assurance companies just agreed to underwrite their useless underperforming endowment policies much of this pain and extra cost could be avoided.
Failing that people, and the life assurance industry, are going to be saddled with this problem for years to come.
The Financial Services Compensation Scheme (FSCS) has declared Berkeley Independent Advisers (BIA) network in default, five months after Tenet acquired it for £700K.
The FSCS said that the decision had been made after receiving 300 claims for compensation from individuals, and after being advised by administrators PricewaterhouseCoopers that it did not have sufficient assets to meet the cost of redress.
Consumers will now be able to receive compensation for alleged poor advice from BIA's advisers in relation to endowment mortgages, investment bonds and personal pensions.
All other regulated financial services firms, including other advisers, will cover the bill for compensating former BIA clients through their annual levy to the FSCS.
Questions are being raised as to the speed with which BIA has been declared in default.
As repeated time and time again on this site, if the life assurance companies just agreed to underwrite their useless underperforming endowment policies much of this pain and extra cost could be avoided.
Failing that people, and the life assurance industry, are going to be saddled with this problem for years to come.
Tuesday, August 22, 2006
2006 Statistics
2006 Statistics
According to the 2005/06 annual review from the Financial Ombudsman Service (FOS), mortgage endowment complaints have fallen very slightly. However, insurance-related disputes are on the increase.
The total number of new cases considered by the Ombudsman in the year ending 31 March 2006 across all financial products increased to 112,923 from 110,963.
New mortgage endowment cases, which accounted for 61% of the total, dropped very slightly from 69,737 at 31 March 2005 to 69,149 a year later. This is the first time the FOS has recorded a decrease in complaints about these useless products since 2003/04.
Hardly a dramatic fall though, and indicative of the sorry regard with which the British public hold the life assurance industry.
According to the 2005/06 annual review from the Financial Ombudsman Service (FOS), mortgage endowment complaints have fallen very slightly. However, insurance-related disputes are on the increase.
The total number of new cases considered by the Ombudsman in the year ending 31 March 2006 across all financial products increased to 112,923 from 110,963.
New mortgage endowment cases, which accounted for 61% of the total, dropped very slightly from 69,737 at 31 March 2005 to 69,149 a year later. This is the first time the FOS has recorded a decrease in complaints about these useless products since 2003/04.
Hardly a dramatic fall though, and indicative of the sorry regard with which the British public hold the life assurance industry.
Monday, August 14, 2006
Shabby Abbey
Shabby Abbey
Abbey is reportedly still struggling to address and satisfy its endowments problems, some 15 months after Abbey was fined £800K by the Financial Services Authority (FSA) for its poor performance in handling endowment mortgage mis-selling complaints.
According to reports, endowment complaints companies say that paperwork frequently goes missing at Abbey and that their clients are waiting months for a decision from Abbey about their cases.
Keypoint Endowment Claims allege that it has 500 Abbey clients who have all been waiting over 8 weeks for a decision from Abbey. In fact the majority have waited over 3 months.
The FSA rules stipulate that endowment providers must decide whether to uphold or reject a mis-selling complaint within 8 weeks. In the event that they cannot stick to this deadline, they must send a holding letter to complainants. Failure to do this is a breach of the FSA rules, and risks disciplinary action.
John Gardiner, operations director at Keypoint, is quoted as saying:
"Abbey is by far the slowest, most disorganised and inflexible endowment company we deal with.
In more than half of the 500 outstanding cases I have with Abbey, the bank hasn't even sent a holding letter."
Abbey is owned by Banco Santander, and was fined £800K last year and ordered to reopen 50,000 mis-selling cases that it had previously rejected.
I repeat, much of this pain and mess could all be stopped if the life assurance companies bit the bullet and underwrote these useless products that we have been lumbered with.
Abbey is reportedly still struggling to address and satisfy its endowments problems, some 15 months after Abbey was fined £800K by the Financial Services Authority (FSA) for its poor performance in handling endowment mortgage mis-selling complaints.
According to reports, endowment complaints companies say that paperwork frequently goes missing at Abbey and that their clients are waiting months for a decision from Abbey about their cases.
Keypoint Endowment Claims allege that it has 500 Abbey clients who have all been waiting over 8 weeks for a decision from Abbey. In fact the majority have waited over 3 months.
The FSA rules stipulate that endowment providers must decide whether to uphold or reject a mis-selling complaint within 8 weeks. In the event that they cannot stick to this deadline, they must send a holding letter to complainants. Failure to do this is a breach of the FSA rules, and risks disciplinary action.
John Gardiner, operations director at Keypoint, is quoted as saying:
"Abbey is by far the slowest, most disorganised and inflexible endowment company we deal with.
In more than half of the 500 outstanding cases I have with Abbey, the bank hasn't even sent a holding letter."
Abbey is owned by Banco Santander, and was fined £800K last year and ordered to reopen 50,000 mis-selling cases that it had previously rejected.
I repeat, much of this pain and mess could all be stopped if the life assurance companies bit the bullet and underwrote these useless products that we have been lumbered with.
Monday, July 31, 2006
Endowment Claims Double
Endowment Claims Double
The Financial Services Authority (FSA) has doubled its estimate of how much firms have paid out in compensation for mis-selling endowment mortgages in the past, up to £2.2BN.
The FSA said the estimate is up to April 1, 2006.
The previous estimate of £1.1BN was up to the end of 2004.
Compensation payments have jumped sharply, £945M was paid in the year to April 1 with the number of complaints rising to 767,152.
In the year to April 1, 2005, compensation was £601M for 324,935 complaints. In 2003/04 compensation was £424M for 202,200 complaints, and before April 2003 compensation totalled £225M for 250,000 complaints.
Bradford & Bingley on Thursday announced its compensation provision would rise to £165M.
All of this pain could be avoided if the life assurance companies bit the bullet between their teeth, and agreed to underwrite these useless policies.
The Financial Services Authority (FSA) has doubled its estimate of how much firms have paid out in compensation for mis-selling endowment mortgages in the past, up to £2.2BN.
The FSA said the estimate is up to April 1, 2006.
The previous estimate of £1.1BN was up to the end of 2004.
Compensation payments have jumped sharply, £945M was paid in the year to April 1 with the number of complaints rising to 767,152.
In the year to April 1, 2005, compensation was £601M for 324,935 complaints. In 2003/04 compensation was £424M for 202,200 complaints, and before April 2003 compensation totalled £225M for 250,000 complaints.
Bradford & Bingley on Thursday announced its compensation provision would rise to £165M.
All of this pain could be avoided if the life assurance companies bit the bullet between their teeth, and agreed to underwrite these useless policies.
Thursday, July 27, 2006
Bradford and Bingley Hit By Claims
Bradford and Bingley Hit By Claims
Bradford & Bingley PLC today announced a larger than expected hit from endowment compensation claims by annoyed endowment customers.
Bradford & Bingley said that it was setting aside a further £89.4M, to cover the higher-than-expected number of complaints from customers who claim they were mis-sold endowment policies.
The total provisions now stand at £165.2M.
Bradford & Bingley CEO Steven Crawshaw said that he could not rule out further provisions in future.
Quote:
"It'd be a very brave person who would say that this is the last, but there are signs of light at the end of the tunnel."
Analysts at Keefe, Bruyette & Woods wrote in a note:
"The compensation claims for mis-selling are massive in relation to expectations and historical experience. While this should be a one-off, it is a negative for sentiment."
Bradford & Bingley also said underlying pretax profit, which excludes the endowment provision, came in at £164.2M in the six months to June 30, up 9% from £150M in the same period last year. Analysts had been expecting profit of £162.4M.
In my view a lot of heartache for those who bought these useless policies, and those who "manage" them, could have been saved if the life assurance companies simply underwrote them.
Bradford & Bingley PLC today announced a larger than expected hit from endowment compensation claims by annoyed endowment customers.
Bradford & Bingley said that it was setting aside a further £89.4M, to cover the higher-than-expected number of complaints from customers who claim they were mis-sold endowment policies.
The total provisions now stand at £165.2M.
Bradford & Bingley CEO Steven Crawshaw said that he could not rule out further provisions in future.
Quote:
"It'd be a very brave person who would say that this is the last, but there are signs of light at the end of the tunnel."
Analysts at Keefe, Bruyette & Woods wrote in a note:
"The compensation claims for mis-selling are massive in relation to expectations and historical experience. While this should be a one-off, it is a negative for sentiment."
Bradford & Bingley also said underlying pretax profit, which excludes the endowment provision, came in at £164.2M in the six months to June 30, up 9% from £150M in the same period last year. Analysts had been expecting profit of £162.4M.
In my view a lot of heartache for those who bought these useless policies, and those who "manage" them, could have been saved if the life assurance companies simply underwrote them.
Tuesday, July 18, 2006
Claims Firm Collapses
Claims Firm Collapses
As if things were not already bad enough for the millions of people stuck with underperforming and useless endowment policies, 6000 now face the added burden of having paid money to a claims firm that has been wound up by the DTI.
6000 people whose endowments failed paid £495 upfront to a claims company, Manchester-based Vickers Anderson Consulting.
It is unclear as to whether they will be able to get their money back.
What a mess!
As if things were not already bad enough for the millions of people stuck with underperforming and useless endowment policies, 6000 now face the added burden of having paid money to a claims firm that has been wound up by the DTI.
6000 people whose endowments failed paid £495 upfront to a claims company, Manchester-based Vickers Anderson Consulting.
It is unclear as to whether they will be able to get their money back.
What a mess!
Wednesday, July 05, 2006
250 A Day Habit
250 A Day Habit
The Financial Services Ombudsman (FSO) announced that it received 250 complaints a day last year about endowment mortgages.
Walter Merricks, the chief ombudsman, said that there were indications that the "extraordinary high volume" of complaints about endowment mortgages was levelling off.
The Financial Services Ombudsman (FSO) announced that it received 250 complaints a day last year about endowment mortgages.
Walter Merricks, the chief ombudsman, said that there were indications that the "extraordinary high volume" of complaints about endowment mortgages was levelling off.
Saturday, July 01, 2006
Words of Wisdom
Words of Wisdom
There are some words of wisdom in the FT for holders of Standard Life with profits policies.
There are some words of wisdom in the FT for holders of Standard Life with profits policies.
Thursday, June 29, 2006
A Nice Little Earner
A Nice Little Earner
Those of you who were worried that the poor old executives of Standard Life might not do so well out of their forthcoming share listing, need not worry.
As already reported on this site, the share listing has been badly affected by the downturn in the stock market; it meant that Standard Life are having to offer their shares at a lower than expected price.
Needless to say, this negatively impacts policyholders who are to receive an allocation of shares; their share allocation is now lower in value than they had been expecting.
It should be remembered that it is not only policyholders who receive shares, but the board of Standard Life as well. Therefore they too will receive a lower valuation of their allocation.
Now as with many things in life, not everything is as clear cut as it first may seem. You see, some of the board have a nice agreement whereby if the share price is lower than first expected they get allocated more shares.
Standard Life's top five executives will be awarded more shares if the issue is priced cheaply.
It seems that the agreement has put management's interests alongside the institutions, which will be pressing for a low issue price, rather than retail investors that want to sell their shares immediately to get their windfalls.
Sandy Crombie, the chief executive, was awarded a maximum incentive of £1.13M. He is the man who opposed the demutualisation of Standard Life in 2000, when policyholders could have earned 10 times as much as they are now had the deal gone ahead.
Funny old world isn't it?
Those of you who were worried that the poor old executives of Standard Life might not do so well out of their forthcoming share listing, need not worry.
As already reported on this site, the share listing has been badly affected by the downturn in the stock market; it meant that Standard Life are having to offer their shares at a lower than expected price.
Needless to say, this negatively impacts policyholders who are to receive an allocation of shares; their share allocation is now lower in value than they had been expecting.
It should be remembered that it is not only policyholders who receive shares, but the board of Standard Life as well. Therefore they too will receive a lower valuation of their allocation.
Now as with many things in life, not everything is as clear cut as it first may seem. You see, some of the board have a nice agreement whereby if the share price is lower than first expected they get allocated more shares.
Standard Life's top five executives will be awarded more shares if the issue is priced cheaply.
It seems that the agreement has put management's interests alongside the institutions, which will be pressing for a low issue price, rather than retail investors that want to sell their shares immediately to get their windfalls.
Sandy Crombie, the chief executive, was awarded a maximum incentive of £1.13M. He is the man who opposed the demutualisation of Standard Life in 2000, when policyholders could have earned 10 times as much as they are now had the deal gone ahead.
Funny old world isn't it?
Wednesday, June 28, 2006
FSA Apologises For Failures
FSA Apologises For Failures
The chairman of the Financial Services Authority (FSA), Callum McCarthy, has apologised over its heavy handed approach to regulation.
McCarthy said that he accepted that the FSA had been dogged by "failures", but claimed it had now made reforms.
Quote:
"The review of the FSA's enforcement procedures we completed last year shows that when we recognise failures in our processes we will seek to remedy them.
I regret that it took us so long to recognise the legitimacy of concerns expressed to us that these processes were not fair to those subject to them."
The apology comes in the wake of the fiasco with Legal & General, which took the FSA to the Financial Services & Markets Tribunal after it was fined £1.1m for mis-selling endowment mortgages. The tribunal ruled the fine had been twice as high as was justified.
Meanwhile, the holders of these useless underperforming products continue to face shortfalls.
The chairman of the Financial Services Authority (FSA), Callum McCarthy, has apologised over its heavy handed approach to regulation.
McCarthy said that he accepted that the FSA had been dogged by "failures", but claimed it had now made reforms.
Quote:
"The review of the FSA's enforcement procedures we completed last year shows that when we recognise failures in our processes we will seek to remedy them.
I regret that it took us so long to recognise the legitimacy of concerns expressed to us that these processes were not fair to those subject to them."
The apology comes in the wake of the fiasco with Legal & General, which took the FSA to the Financial Services & Markets Tribunal after it was fined £1.1m for mis-selling endowment mortgages. The tribunal ruled the fine had been twice as high as was justified.
Meanwhile, the holders of these useless underperforming products continue to face shortfalls.
Thursday, June 22, 2006
Bradford and Bingley Hit
Bradford and Bingley Hit
Bradford & Bingley have been hit by new claims for compensation for the misselling of endowment and investment policies. They are thinking of taking a charge to cover potential settlements.
B&B provided a trading statement which did not make it clear as to whether the increase, over the first half of this year, was temporary or indicated a trend in increased claims.
Quote:
"The volume of claims for compensation related to endowment and investment products has increased markedly, reversing the downward trend established in the second half of 2005.
At this stage it is not clear whether the recent increase in claims is temporary and reflects only an acceleration of future claims or whether this is a new trend.
We are currently reviewing the adequacy of our provisions in respect of these claims with a view to taking a further charge and will provide an update at the interim [results]."
Why don't the life assurance companies just underwrite these policies, thus reducing the amount of time and money wasted by them on trying to avoid paying claims for compensation?
Bradford & Bingley have been hit by new claims for compensation for the misselling of endowment and investment policies. They are thinking of taking a charge to cover potential settlements.
B&B provided a trading statement which did not make it clear as to whether the increase, over the first half of this year, was temporary or indicated a trend in increased claims.
Quote:
"The volume of claims for compensation related to endowment and investment products has increased markedly, reversing the downward trend established in the second half of 2005.
At this stage it is not clear whether the recent increase in claims is temporary and reflects only an acceleration of future claims or whether this is a new trend.
We are currently reviewing the adequacy of our provisions in respect of these claims with a view to taking a further charge and will provide an update at the interim [results]."
Why don't the life assurance companies just underwrite these policies, thus reducing the amount of time and money wasted by them on trying to avoid paying claims for compensation?
Friday, June 16, 2006
Standard Life Price Reduction
Standard Life Price Reduction
The current rout of the world stock markets has forced Standard Life to cut the price range for its listing on the UK stock market next month by 10%.
The group's 2.4 million policyholders will have their average payouts reduced to about £1,540 compared to £1,700.
Needless to say, the policyholders are far from happy with this, some are quoted as saying that they are "completely disillusioned" with the company.
The price range for the shares has been brought down from 240-290p to 210-270p.
Sandy Crombie, its chief executive, said the board and its advisers "had a very serious discussion about delaying".
He compared the float process with "a juggernaut, difficult to stop once it is launched".
This is rather ironic as only a few years ago Crombie fought against listing Standard Life, and managed to persuade the policyholders to vote against it. That was back in 2000, when the policyholders would have made ten times as much as they are doing now.
A cynic might question why Crombie still holds office?
Phil Needham, a policyholder, is quoted as saying:
"I'm completely disillusioned with Standard Life.
My own payment was expected to be between 7,000 and 9,000, but this development will knock about 10 per cent off this figure. They ought to have demutualised five years ago.
As a company over the past five years its performance has been appalling."
This fall in price leaves them open to a hostile bid.
Given this shambles, and the ongoing industry wide endowment policy fiasco, it is hardly surprising that people have totally lost confidence in Britain's life assurance industry.
The current rout of the world stock markets has forced Standard Life to cut the price range for its listing on the UK stock market next month by 10%.
The group's 2.4 million policyholders will have their average payouts reduced to about £1,540 compared to £1,700.
Needless to say, the policyholders are far from happy with this, some are quoted as saying that they are "completely disillusioned" with the company.
The price range for the shares has been brought down from 240-290p to 210-270p.
Sandy Crombie, its chief executive, said the board and its advisers "had a very serious discussion about delaying".
He compared the float process with "a juggernaut, difficult to stop once it is launched".
This is rather ironic as only a few years ago Crombie fought against listing Standard Life, and managed to persuade the policyholders to vote against it. That was back in 2000, when the policyholders would have made ten times as much as they are doing now.
A cynic might question why Crombie still holds office?
Phil Needham, a policyholder, is quoted as saying:
"I'm completely disillusioned with Standard Life.
My own payment was expected to be between 7,000 and 9,000, but this development will knock about 10 per cent off this figure. They ought to have demutualised five years ago.
As a company over the past five years its performance has been appalling."
This fall in price leaves them open to a hostile bid.
Given this shambles, and the ongoing industry wide endowment policy fiasco, it is hardly surprising that people have totally lost confidence in Britain's life assurance industry.
Monday, June 12, 2006
Welsh Victory
Welsh Victory
Congratulations to Philip Lewis, who has managed to achieve the first victory in Wales against a building society who sold him an underperforming endowment mortgage.
The Principality has been ordered by Cardiff County Court to pay £4,600 to Mr Lewis, who bought a house in the city for £8,500 in 1975.
More details here: endowment victory.
Congratulations to Philip Lewis, who has managed to achieve the first victory in Wales against a building society who sold him an underperforming endowment mortgage.
The Principality has been ordered by Cardiff County Court to pay £4,600 to Mr Lewis, who bought a house in the city for £8,500 in 1975.
More details here: endowment victory.
Monday, June 05, 2006
Time Bar Challenge
Time Bar Challenge
It is reported that Brunel Franklin, an endowment claims specialist, has raised a legal challenge to the Financial Services Authority (FSA) and the Financial Ombudsman Service over time bars on endowment mortgage complaints.
Brunel Franklin believe that the policy is "inconsistent", and hope to change the current time bar deadline for endowment policy holders to make a complaint.
The FSA rules sate that insurers are within their rights to impose a deadline, but that this must be three years from the date the policyholder received a 'red' letter warning of a potential shortfall.
It is estimated that one million people have already been time barred to date.
Brunel Franklin claim that the red letters were misleading and did not state all the facts.
Claims director Ian Allison is quoted:
"Many did not explain to policyholders that their endowment may have been mis-sold and that they had the right to complain about its sale.
As such, a policyholder could not reasonably have expected to know that they were mis-sold the endowment or what to do about it."
All of this could be so easily resolved, if the life assurance companies underwrote these useless underperforming policies.
It is reported that Brunel Franklin, an endowment claims specialist, has raised a legal challenge to the Financial Services Authority (FSA) and the Financial Ombudsman Service over time bars on endowment mortgage complaints.
Brunel Franklin believe that the policy is "inconsistent", and hope to change the current time bar deadline for endowment policy holders to make a complaint.
The FSA rules sate that insurers are within their rights to impose a deadline, but that this must be three years from the date the policyholder received a 'red' letter warning of a potential shortfall.
It is estimated that one million people have already been time barred to date.
Brunel Franklin claim that the red letters were misleading and did not state all the facts.
Claims director Ian Allison is quoted:
"Many did not explain to policyholders that their endowment may have been mis-sold and that they had the right to complain about its sale.
As such, a policyholder could not reasonably have expected to know that they were mis-sold the endowment or what to do about it."
All of this could be so easily resolved, if the life assurance companies underwrote these useless underperforming policies.
Thursday, June 01, 2006
Standard Life To Float
Standard Life To Float
Standard Life will list on the stock exchange in July, after 98% of members voted to demutualise yesterday.
Had the company not campaigned so hard in 2000 against demutualisation, when the members were persuaded to vote no, the members would have made ten times the amount that they are likely to make now.
Funny old world isn't it?
Standard Life will list on the stock exchange in July, after 98% of members voted to demutualise yesterday.
Had the company not campaigned so hard in 2000 against demutualisation, when the members were persuaded to vote no, the members would have made ten times the amount that they are likely to make now.
Funny old world isn't it?
FT
FT
Hat tip to Charles Pretzlik of the Financial Times, who yesterday mentioned this site and the endowment petition that I am running.
Hat tip to Charles Pretzlik of the Financial Times, who yesterday mentioned this site and the endowment petition that I am running.
Wednesday, May 31, 2006
D Day For Standard Life
D Day For Standard Life
Standard Life Assurance faces D Day today, as it faces the vote on whether to demutualise and sell shares next month.
The timing is unfortunate, as the world stock markets are currently in decline.
Chief Executive Officer Sandy Crombie said last night:
"What really matters is the appetite of investors to put money in Standard Life."
Standard Life currently plans to sell its shares at between 240p-290p. Policyholders must vote by today on the plan.
The IPO would value Standard Life at £5.5BN. It is somewhat ironic that Crombie back in 2000 fought against demutualisation, when the reward for policyholders would have been 10 times as much.
In 2000 over 1 million Standard Life policyholders voted against a stock sale, after Standard Life spent £10M on a campaign against it.
The company then incurred investment losses after selling £7.5BN pounds of stocks in 2004, to meet stricter rules from the Financial Services Authority.
In other words, this is a forced sale.
Standard Life Assurance faces D Day today, as it faces the vote on whether to demutualise and sell shares next month.
The timing is unfortunate, as the world stock markets are currently in decline.
Chief Executive Officer Sandy Crombie said last night:
"What really matters is the appetite of investors to put money in Standard Life."
Standard Life currently plans to sell its shares at between 240p-290p. Policyholders must vote by today on the plan.
The IPO would value Standard Life at £5.5BN. It is somewhat ironic that Crombie back in 2000 fought against demutualisation, when the reward for policyholders would have been 10 times as much.
In 2000 over 1 million Standard Life policyholders voted against a stock sale, after Standard Life spent £10M on a campaign against it.
The company then incurred investment losses after selling £7.5BN pounds of stocks in 2004, to meet stricter rules from the Financial Services Authority.
In other words, this is a forced sale.
Tuesday, May 30, 2006
Gains On Endowments?
Gains On Endowments?
The FT claims that long-term mortgage endowment policyholders, who claimed for mis-selling are now making gains from their policies; according to a survey, the 25 year policies are faring the best.
We shall see.
The FT claims that long-term mortgage endowment policyholders, who claimed for mis-selling are now making gains from their policies; according to a survey, the 25 year policies are faring the best.
We shall see.
Thursday, May 18, 2006
Scots Shortchanged
Scots Shortchanged
Linda Costelloe Baker, Scottish legal services ombudsman, warned on Tuesday that the legislation aimed at tightening the regulation of lawyers will not prevent the mis-selling of mortgage policies.
Ms Costelloe Baker said that last year she handled a record 482 complaints, about the way the Law Society of Scotland and Faculty of Advocates handled complaints about their members.
Around 25% of that related to endowment mis-selling complaints.
The Scottish Executive is proposing a new bill which will create an independent commission to handle complaints about lawyers. However, Ms Costelloe Baker said that this would leave the society in charge of practice rules.
Quote:
"When I was looking at the bill I had endowment misselling complaints very much in mind. I kept on asking myself would this bill stop this happening again, and it wouldn't. Not while the actual regulation is done by the profession.
For example, the society did not expect solicitors to keep business files relating to the sale of endowment policies, so there is little or no evidence on which to base an investigation."
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. They can claim compensation through the society, but only to a maximum of £1000.
A pretty raw deal by anyone's standards!
Linda Costelloe Baker, Scottish legal services ombudsman, warned on Tuesday that the legislation aimed at tightening the regulation of lawyers will not prevent the mis-selling of mortgage policies.
Ms Costelloe Baker said that last year she handled a record 482 complaints, about the way the Law Society of Scotland and Faculty of Advocates handled complaints about their members.
Around 25% of that related to endowment mis-selling complaints.
The Scottish Executive is proposing a new bill which will create an independent commission to handle complaints about lawyers. However, Ms Costelloe Baker said that this would leave the society in charge of practice rules.
Quote:
"When I was looking at the bill I had endowment misselling complaints very much in mind. I kept on asking myself would this bill stop this happening again, and it wouldn't. Not while the actual regulation is done by the profession.
For example, the society did not expect solicitors to keep business files relating to the sale of endowment policies, so there is little or no evidence on which to base an investigation."
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. They can claim compensation through the society, but only to a maximum of £1000.
A pretty raw deal by anyone's standards!
Monday, May 15, 2006
Complain
Complain
The Observer makes rather a good point, that those endowment policy holders who may be time barred from complaining may still be able to raise a valid claim for compensation, if their policy overruns into retirement.
Bottom line, don't let the life assurance companies that sold and poorly managed these useless policies get off the hook.
The Observer makes rather a good point, that those endowment policy holders who may be time barred from complaining may still be able to raise a valid claim for compensation, if their policy overruns into retirement.
Bottom line, don't let the life assurance companies that sold and poorly managed these useless policies get off the hook.
Wednesday, May 10, 2006
Prudential Time Bar
Prudential Time Bar
The Prudential is, according to the Association of British Insurers (ABI), the last major life assurance company to introduce time bars to their endowment policy holders wishing to complain about shortfalls on their endowment policies.
The ABI last year estimated that around 2.7 million households in Britain have an endowment policy that is needed to pay off all or part of a mortgage, and that over 80% face a shortfall.
ABI spokesman Malcolm Tarling said that:
"Time-barring will help focus people's minds. The longer people wait to file a legitimate complaint, the harder it is to establish the facts."
The Prudential says that it will write to 110,000 customers to tell them about the new, six-month deadline for complaints.
Legal & General and Nationwide Building Society have also introduced time barring in the last two months.
Not surprisingly the insurance companies want to bring the matter to a close, as they are the ones who are being hit by the claims from their endowment policy holders.
This sorry pathetic mess could be sorted out at the stroke of a pen, if the insurance companies acted responsibly and underwrote these useless underperforming products which they foisted on the British public back in the 1980's.
The Prudential is, according to the Association of British Insurers (ABI), the last major life assurance company to introduce time bars to their endowment policy holders wishing to complain about shortfalls on their endowment policies.
The ABI last year estimated that around 2.7 million households in Britain have an endowment policy that is needed to pay off all or part of a mortgage, and that over 80% face a shortfall.
ABI spokesman Malcolm Tarling said that:
"Time-barring will help focus people's minds. The longer people wait to file a legitimate complaint, the harder it is to establish the facts."
The Prudential says that it will write to 110,000 customers to tell them about the new, six-month deadline for complaints.
Legal & General and Nationwide Building Society have also introduced time barring in the last two months.
Not surprisingly the insurance companies want to bring the matter to a close, as they are the ones who are being hit by the claims from their endowment policy holders.
This sorry pathetic mess could be sorted out at the stroke of a pen, if the insurance companies acted responsibly and underwrote these useless underperforming products which they foisted on the British public back in the 1980's.
Tuesday, May 02, 2006
The Policyholders Fight Back
The Policyholders Fight Back
Congratulations to Vincent Cunningham, who has succeeded in taking his life assurance company to court and winning compensation from them for their underperforming product.
This is reportedly the first case of its kind.
Cunningham has successfully sued Friends Provident for compensation on the shortfall on his policy, even though he failed to make a claim within three years of receiving a 'red warning letter' notifying him of a potential shortfall.
He was awarded £1500 by Reigate county court.
It should be noted that the case does not set a legal precedent, because it was heard in a county court. However, it could have implications for the thousands of hapless endowment policy holders who have been told they had run out of time to make a claim against their endowment providers.
As such, the case may encourage others to take a stand against the life assurance companies who are trying to impose their own time bar.
Where one leads, others will follow!
Here is the judge's ruling Vincent Cunnignham vs Friends Provident.
Congratulations to Vincent Cunningham, who has succeeded in taking his life assurance company to court and winning compensation from them for their underperforming product.
This is reportedly the first case of its kind.
Cunningham has successfully sued Friends Provident for compensation on the shortfall on his policy, even though he failed to make a claim within three years of receiving a 'red warning letter' notifying him of a potential shortfall.
He was awarded £1500 by Reigate county court.
It should be noted that the case does not set a legal precedent, because it was heard in a county court. However, it could have implications for the thousands of hapless endowment policy holders who have been told they had run out of time to make a claim against their endowment providers.
As such, the case may encourage others to take a stand against the life assurance companies who are trying to impose their own time bar.
Where one leads, others will follow!
Here is the judge's ruling Vincent Cunnignham vs Friends Provident.
Tuesday, April 25, 2006
Standard Life Bonanza
Standard Life Bonanza
Those of you who hold endowment policies with Standard Life may be in for a small windfall, if the company abandons its mutual status and floats.
Standard Life has posted its policy documents to members outlining the terms of the proposed deal, and inviting them to vote in favour either by post or at a special meeting on May 31.
The company says that 2.4M members will be eligible for free shares.
A Standard Life spokesman is quoted as saying:
"The way shares are being allocated is on the basis of a range of factors, which include the type of policy someone might have with us, how long it has been held and how much is in it."
For example, the company said that a policyholder who had been paying £50 a month on a mortgage-linked endowment since 1984, would receive 1287 shares worth about £3350.
Someone whose endowment policy started in 1989 would receive 544 shares, worth £1440, while a policy started in 1994 would earn 132 shares, worth £350. In each case, this would be on top of the basic allocation of 185 free shares. In addition, the company said everyone who holds their shares for up to 12 months after the initial flotation date, expected in July, will receive one more free share for each 20 they already own.
One question mark yet to be answered is what effect the "mortgage endowment promise" (MEP), given by the company in September 2000, will now have.
The company pledged that, subject to certain conditions being met, as long as future investment earnings averaged 6% a year it would top up any shortfalls on the endowments.
The finer details of the promise revealed that it only applied to those who were told back in 2000 that their policy was at risk of failing to hit its target amount.
Those told after that date were not covered!
In 2004 Standard Life welched on its promise, and abandoned the MEP as unaffordable.
In its proposal document, Standard Life says that if members back its flotation plans, the MEP for qualifying members "will no longer be dependent on a capital growth condition. Instead [it] will be based on investment returns on the with-profits fund".
A spokesman claimed:
"The amount payable to holders of top-up MEP policies will be broadly equivalent to that which would have been paid by Standard Life under the current promise."
We shall see.
Those of you who hold endowment policies with Standard Life may be in for a small windfall, if the company abandons its mutual status and floats.
Standard Life has posted its policy documents to members outlining the terms of the proposed deal, and inviting them to vote in favour either by post or at a special meeting on May 31.
The company says that 2.4M members will be eligible for free shares.
A Standard Life spokesman is quoted as saying:
"The way shares are being allocated is on the basis of a range of factors, which include the type of policy someone might have with us, how long it has been held and how much is in it."
For example, the company said that a policyholder who had been paying £50 a month on a mortgage-linked endowment since 1984, would receive 1287 shares worth about £3350.
Someone whose endowment policy started in 1989 would receive 544 shares, worth £1440, while a policy started in 1994 would earn 132 shares, worth £350. In each case, this would be on top of the basic allocation of 185 free shares. In addition, the company said everyone who holds their shares for up to 12 months after the initial flotation date, expected in July, will receive one more free share for each 20 they already own.
One question mark yet to be answered is what effect the "mortgage endowment promise" (MEP), given by the company in September 2000, will now have.
The company pledged that, subject to certain conditions being met, as long as future investment earnings averaged 6% a year it would top up any shortfalls on the endowments.
The finer details of the promise revealed that it only applied to those who were told back in 2000 that their policy was at risk of failing to hit its target amount.
Those told after that date were not covered!
In 2004 Standard Life welched on its promise, and abandoned the MEP as unaffordable.
In its proposal document, Standard Life says that if members back its flotation plans, the MEP for qualifying members "will no longer be dependent on a capital growth condition. Instead [it] will be based on investment returns on the with-profits fund".
A spokesman claimed:
"The amount payable to holders of top-up MEP policies will be broadly equivalent to that which would have been paid by Standard Life under the current promise."
We shall see.
Tuesday, April 11, 2006
Royal Liver Fined
Royal Liver Fined
Royal Liver, the Liverpool-based mutual life insurer, has been fined £550K by the Financial Services Authority (FSA) who judged it to be guilty of mis-selling with-profits savings policies to thousands of its elderly customers.
The policies were bundled together with life insurance contracts, which were not suitable for the majority of customers.
Some customers ended up getting back less from their policies than they had put in!
Margaret Cole, the FSA's director of enforcement, said:
"This was a serious case of mis-selling, particularly as a significant number of Royal Liver Assurance's customers were nearing retirement age and did not need the cover they were sold.
The failings were systemic and arose from weaknesses in the firm's sales and compliance processes and persisted over a long period of time. Firms must make sure that they take account of all products which may be suitable when making a recommendation."
Royal Liver said in a statement:
"The relevant contracts were withdrawn in the UK in 2004 and all policyholders affected have been contacted and offered a full refund of premiums plus interest at an appropriate rate.
Royal Liver has worked closely with the FSA on this issue to ensure that the appropriate lessons have been learned and controls have been strengthened as a result."
Is it any wonder people don't trust the life assurance industry?
Royal Liver, the Liverpool-based mutual life insurer, has been fined £550K by the Financial Services Authority (FSA) who judged it to be guilty of mis-selling with-profits savings policies to thousands of its elderly customers.
The policies were bundled together with life insurance contracts, which were not suitable for the majority of customers.
Some customers ended up getting back less from their policies than they had put in!
Margaret Cole, the FSA's director of enforcement, said:
"This was a serious case of mis-selling, particularly as a significant number of Royal Liver Assurance's customers were nearing retirement age and did not need the cover they were sold.
The failings were systemic and arose from weaknesses in the firm's sales and compliance processes and persisted over a long period of time. Firms must make sure that they take account of all products which may be suitable when making a recommendation."
Royal Liver said in a statement:
"The relevant contracts were withdrawn in the UK in 2004 and all policyholders affected have been contacted and offered a full refund of premiums plus interest at an appropriate rate.
Royal Liver has worked closely with the FSA on this issue to ensure that the appropriate lessons have been learned and controls have been strengthened as a result."
Is it any wonder people don't trust the life assurance industry?
Wednesday, March 29, 2006
The Decline of The IFA
The Decline of The IFA
This is Money reports that 10 years ago there were about 350,000 financial advisers. However, increased regulation and the impact of the endowment misselling scandal has severely reduced their numbers down to 55,000.
It seems that it is not just the hapless policyholders who are paying the price for these underperforming and useless products.
This is Money reports that 10 years ago there were about 350,000 financial advisers. However, increased regulation and the impact of the endowment misselling scandal has severely reduced their numbers down to 55,000.
It seems that it is not just the hapless policyholders who are paying the price for these underperforming and useless products.
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