The Legacy of Endowment Mortgages

Endowment mortgages, once a popular choice for homeowners, have seen a significant decline in recent years due to a series of mis-selling scandals². These mortgages were designed as a monthly savings plan, typically invested in shares and property, with the aim of paying off the home loan at the end of the term². However, many policyholders have faced shortfalls in the expected payout of the endowment².

Current State of Endowment Mortgages³

In the wake of these scandals and years of negative press, endowment mortgages have been consigned to history³. As of now, you cannot get an endowment mortgage³.

A Case Study: Cashing in Endowments¹

A recent query to The Guardian asked whether it would be wise to cash in an endowment to pay off an interest-only mortgage¹. The reader had an endowment valued at about £51,000, which was about £10,000 more than their current mortgage¹. They were considering cashing in the endowment, paying off the £41,000 interest-only mortgage, and using the £200 a month they were currently paying for it to overpay on their repayment mortgage¹. The expert response suggested that this could be a good idea, as long as the reader did not need the life insurance provided by the endowment¹.

Conclusion

Endowment mortgages, once a popular choice, have seen a significant decline due to mis-selling scandals and subsequent shortfalls in expected payouts. While they are no longer available, those who still hold endowments are left with decisions on how best to manage them. As always, it's important to seek expert advice when making such decisions.

*Please note that this blog post is a summary of recent news articles and does not constitute financial advice. Always seek professional advice before making financial decisions.*

Source: 

(1) Endowment mortgages: Legacy of a scandal - BBC News. https://www.bbc.co.uk/news/business-20858236.
(2) Endowment mortgages – are they still available? | Ideal Home. https://www.idealhome.co.uk/property-advice/endowment-mortgages-304804.
(3) Should I cash in my endowment and pay off my £41,000 interest-only .... https://www.theguardian.com/money/2022/sep/26/should-i-cash-in-my-endowment-and-pay-off-my-41000-interest-only-mortgage.
(4) A guide to endowments | This is Money. https://www.thisismoney.co.uk/money/mortgageshome/article-1583977/Endowments.html.
(5) New mortgage deal falls below 5% in ‘watershed moment’ for UK .... https://www.theguardian.com/money/2023/nov/09/new-mortgage-deal-below-5-percent-watershed-moment-uk-homeowners.

Tax Investigation Insurance
 
Having a Solar Protect Tax Investigation Insurance policy at your disposal means that should you be one of the many 1000's of businesses or individuals that are selected by HMRC each year to look into your tax affairs your own accountant (your tax return agent) can get on and defend you robustly.

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Tax Investigation Insurance is an insurance policy that will fully reimburse your accountants (your tax return agent) fees up to £100,000 if you are subject to enquiry by or dispute with HMRC.

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• Premiums are Annual Premiums.
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Mortgage endowments & Mis-selling Advice Guides

If you believe you’ve been mis-sold an endowment mortgage, you can make a complaint but there are time limits for doing so. 

Which? has guides help you navigate the complaints process, including when to refer a complaint to the ombudsman. 

Is there a deadline for making a mis-sold endowment complaint? 

By Which? 

There are strict time limits for complaining about mis-sold endowments. Read the Which? guide to see if you're owed compensation, and how to claim it.

I think I've been mis-sold my mortgage, what can I do? 

By Which? 

Do you have reason to believe you were mis-sold your mortgage? Read the Which? guide to understand what constitutes mortgage mis-selling. 

Is there a mis-sold endowment policy complaint deadline? 

By Which? 

If you want to complain about a mis-sold endowment and you're within the stated time limits for complaining, here's what you should do. 

Letter to complain about a mis-sold mortgage 

By Which? 

There are many reasons why you may think you've been mis-sold your mortgage. If you think you were mis-sold, use this Which? template letter to complain.
 

Tax Investigation Insurance
 
Having a Solar Protect Tax Investigation Insurance policy at your disposal means that should you be one of the many 1000's of businesses or individuals that are selected by HMRC each year to look into your tax affairs your own accountant (your tax return agent) can get on and defend you robustly.

You have the peace of mind knowing that your accountant's (your tax return agent) fees will be paid by the insurance without any Excess for you to find.

Tax Investigation Insurance is an insurance policy that will fully reimburse your accountants (your tax return agent) fees up to £100,000 if you are subject to enquiry by or dispute with HMRC.

A Solar Protect policy will enable your Accountant (your tax return agent) to:

• Deal with any correspondence from HMRC
• Attend any meeting with HMRC
• Appeal to the First-tier Tribunal or Upper Tribunal
• Having the security of knowing that fees will be met in full will enable your Accountant (your tax return agent) to defend your position robustly
• Premiums are Annual Premiums.
• Premiums are inclusive of 12% IPT. 
• Premiums and IPT are due in full in advance / at commencement of scheme.
• There is a NIL excess on all policies.

Please click here for details.

20,000 Borrowers With Interest-only Mortgages Maturing This Year are Over 65

More than 40,000 borrowers with regulated interest-only mortgages will reach the end of their term this year, owing an average £104,000, according to trade body UK Finance.

But almost half of these homeowners are over 65 and have more than £100,000 remaining on their mortgage.

It is the first of three significant waves of the loans maturing, as estimated by the Financial Conduct Authority (FCA).

Borrowers in this first wave of maturities typically took out the loan in the late 1980s or early 1990s, backed by an endowment policy, ISA or pension.

In total, around 60,000 interest-only mortgages will mature this year, including the 41,000 regulated contracts and 19,000 non-regulated contracts (mortgages as a product only became regulated from 2004).

Tax Investigation Insurance

 
Having a Solar Protect Tax Investigation Insurance policy at your disposal means that should you be one of the many 1000's of businesses or individuals that are selected by HMRC each year to look into your tax affairs your own accountant (your tax return agent) can get on and defend you robustly.

You have the peace of mind knowing that your accountant's (your tax return agent) fees will be paid by the insurance without any Excess for you to find.

Tax Investigation Insurance is an insurance policy that will fully reimburse your accountants (your tax return agent) fees up to £100,000 if you are subject to enquiry by or dispute with HMRC.

A Solar Protect policy will enable your Accountant (your tax return agent) to:

• Deal with any correspondence from HMRC
• Attend any meeting with HMRC
• Appeal to the First-tier Tribunal or Upper Tribunal
• Having the security of knowing that fees will be met in full will enable your Accountant (your tax return agent) to defend your position robustly
• Premiums are Annual Premiums.
• Premiums are inclusive of 12% IPT. 
• Premiums and IPT are due in full in advance / at commencement of scheme.
• There is a NIL excess on all policies.

Please click here for details.

Endowment Advice Leads to Default

The FT reports that another advice firm has defaulted with the Financial Services Compensation Scheme, after receiving claims against failed endowment policies.

The lifeboat body has already paid a claim for more than £11,000 but the bill against Hector McLean Financial Consultants could potentially grow, with another two claims currently being considered by the compensation scheme.

The company was declared in default on February 17 with claims against it relating to endowment mortgages - the same policies which resulted in one of the most notorious mis-selling scandals of the 21st century.

Mortgage endowments were pushed in huge volumes in the 1970s through to the 1990s alongside interest-only mortgages.

The policy is a mixture of an investment and an insurance policy, providing both life assurance and savings, which is designed to repay a mortgage. The consumer only pays interest on the mortgage each month, and also pays monthly into the mortgage endowment, which is then used to pay off the mortgage.

If initial growth predictions were realised the mortgage should have been paid off by the term end, possibly with an additional lump sum for the individual. But projections were often too ambitious and regulators at the time set very guidelines for different yield assumptions on the mortgages than they did later on.

On its website the FSCS details certain criteria which could lead to a successful claim against a mis-sold mortgage endowment policy, including if an adviser did not fully explain the policy’s link to the stock market.

Because of this link there was a risk at the end of its term the policy could leave the client with a shortfall for paying their mortgage.

Time limits apply to mortgage endowment claims, with consumers expected to make a request for compensation six years after they were sold the policy or three years from the date it became apparent they had cause for complaint.

The main investment adviser at Hector McLean Financial Consultants was also a director at Hector McLean Mortgages Limited, which was de-authorised in 2008.

Tax Investigation Insurance
 
Having a Solar Protect Tax Investigation Insurance policy at your disposal means that should you be one of the many 1000's of businesses or individuals that are selected by HMRC each year to look into your tax affairs your own accountant (your tax return agent) can get on and defend you robustly.

You have the peace of mind knowing that your accountant's (your tax return agent) fees will be paid by the insurance without any Excess for you to find.

Tax Investigation Insurance is an insurance policy that will fully reimburse your accountants (your tax return agent) fees up to £100,000 if you are subject to enquiry by or dispute with HMRC.

A Solar Protect policy will enable your Accountant (your tax return agent) to:

• Deal with any correspondence from HMRC
• Attend any meeting with HMRC
• Appeal to the First-tier Tribunal or Upper Tribunal
• Having the security of knowing that fees will be met in full will enable your Accountant (your tax return agent) to defend your position robustly
• Premiums are Annual Premiums.
• Premiums are inclusive of 12% IPT. 
• Premiums and IPT are due in full in advance / at commencement of scheme.
• There is a NIL excess on all policies.

Please click here for details.

Endowment Mis-selling Claim Dismissed

IoM Today reports that a couple have lost their claim of alleged mis-selling by an Isle of Man based insurance firm.

Keith and Nicola McSween took out an endowment policy with Royal London in 1991 as an investment vehicle to repay their mortgage.

They claim their financial adviser told them that the policy would provide a guaranteed £32,500 plus £40,000 substantial lump sum on maturity.

The McSweens claim there was no mention of premium increases up to 10% each year and no mention there could be a shortfall.

Their premiums were increased from £55.78 a month to £67.48 to cover a shortfall and ultimately the policy paid out £32,500 but with a lump sum of only £7,622.

’We genuinely believe that we were mis-sold our Royal London endowment policy like many other thousands of people up and down the country,’

Royal London said that the policy was arranged through an independent financial adviser.

It denied that the policy guaranteed payment of a lump sum of £40,000 and that periodic reviews of investment performance would be carried out to see whether the policy would reach the target amount on maturity.

If a shortfall was likely, the sum assured would be increased as would premiums.

Royal London said it wrote to the claimants at regular intervals from May 2005 to July 2009 to advise of a risk of shortfall on maturity due to the performance of the underlying investments and assumptions as to future investment growth.

Deemster Andrew Corlett ruled the claim was made well out of time.


Deemster Corlett said he had not been satisfied that the financial adviser misrepresented the position with the premiums by saying that they would not under any circumstances increase.

’In making these findings, I do not consider that the claimants gave misleading evidence.

More likely it is that Mr McSween in particular has over the years convinced himself that certain things were said at that long-distant meeting, which I have found to be improbable.’

In his judgment, Deemster Corlett said:

’I conclude that the claimants’ claim must be dismissed.

As I have explained, not only does the claimants’ case fail on the factual allegations made, but in addition and as a matter of law, the claim has been brought well out of the time permitted by Tynwald in which to bring legal action, and furthermore the asserted claim for damages is misconceived as a matter of law.’

Tax Investigation Insurance
 
Having a Solar Protect Tax Investigation Insurance policy at your disposal means that should you be one of the many 1000's of businesses or individuals that are selected by HMRC each year to look into your tax affairs your own accountant (your tax return agent) can get on and defend you robustly.

You have the peace of mind knowing that your accountant's (your tax return agent) fees will be paid by the insurance without any Excess for you to find.

Tax Investigation Insurance is an insurance policy that will fully reimburse your accountants (your tax return agent) fees up to £100,000 if you are subject to enquiry by or dispute with HMRC.

A Solar Protect policy will enable your Accountant (your tax return agent) to:

• Deal with any correspondence from HMRC
• Attend any meeting with HMRC
• Appeal to the First-tier Tribunal or Upper Tribunal
• Having the security of knowing that fees will be met in full will enable your Accountant (your tax return agent) to defend your position robustly
• Premiums are Annual Premiums.
• Premiums are inclusive of 12% IPT. 
• Premiums and IPT are due in full in advance / at commencement of scheme.
• There is a NIL excess on all policies.

Please click here for details.

Endowment Payment Release Forms

As many endowment policies, taken out in the 1980's, are maturing/due to mature in the coming year; I would be interested to hear from anyone who has received a payment release form that contains any onerous/unusual conditions that implies that the hapless policyholder would be bound by if he/she signs the form.

The Interest Only Timebomb

As many interest only mortgages (which were meant to be covered by endowment policies) mature in the next few years, many people are facing significant debts that they cannot afford to repay because of the dismal performance of these endowment products.

An analysis of Financial Services Authority (FSA) figures shows that of the 150,000 interest-only mortgages a year that are due to mature in the next eight years, 60,000 are likely to be in shortfall. Of these 42,000 will be in the names of people over the age of 60 either at or close to retirement.

When faced with a shortfall there are a number of options that may be available to the hapless debtor, including the following:

- sell the home, use the proceeds to pay off the shortfall and downsize, or
- negotiate an extended term for the shortfall portion of the mortgage with the lender, or
- look into the possibility of a lifetime mortgage/equity release scheme.

Richard Evans of the Telegraph has provided some helpful background on equity release schemes here.

Endowment Policies Fail

As per This Is Money:

"Up to 360,000 families may be forced to sell their home this year because record numbers of endowment policies have failed to deliver.

In many cases, these homeowners are seeing endowments fall £100,000 short of what they were promised."

Barclays Variable Rate Mortgages

Advice from Zerohedge to anyone with a Barclays variable rate mortgage between 2005 and now:

"Our advice to anyone who had an adjustable rate mortgage in the period between 2005 and today: sue the living feces out of Barclays, and all other banks who crawl out of the woodwork with purported settlements. 

Because due to their undisputed mark manipulation, it is absolutely safe to say that ARMs, which rely on Libor for interest rate formation, were grossly manipulated by the same idiot traders who left written evidence of their manipulation year after year. 

Now it is their turn to pay."

L&G Talk Bollocks!

Legal and General (L&G) have sent me a summary of the performance of my two "with profits" (a misnomer if ever there was one) polices that I have with them.

They mature this year and, in theory, are meant to cover a £75K mortgage.

Based on the less than stellar performance to date, as outlined in the bonus statement for 2011, I estimate that the shortfall will be around £30K; ie a percentage shortfall of 40%!

This spectacularly poor performance is "odd" given what L&G say about themselves:

"You have one of the UK's leading fund management groups looking after your money.

The With Profits Fund aims to even out some of the short-term ups and downs of investing, helping you to plan for your future."

Complete and utter bollocks!

Do these people really believe their own bullshit?