The Endowment Diary

Here is an extract of the letter I have sent to the Ombudsman today, in response to their letter received on Saturday:

"Thank you for your letter (dated 26 September) in respect of my complaint against A (Ref ****).

I note the contents, and have the following observations; which I will make in the same order as the points raised in your letter:

 You note that there was a 6 week gap between my enquiry about the policy and completing the paperwork. The inference being, that this delay was due to me taking time to consider the arrangement. The delay was in fact due to a number of problems arising with the sale of my apartment, and the purchase of a new apartment. My time and effort was being devoted to resolving these problems.

 A proceeding with the sale of the endowment despite the non completion of part of the fact find, whether legally mandatory or not, was a breach of their own internal procedures. They have admitted this; as such it constitutes a mis-sale by their own rules and procedures.

 You note that I was already in the process of setting up an interest only mortgage, and that section 19 of the *** form shows that methods of repayment were discussed. I would draw your attention to the fact that I already held an endowment mortgage, which was set up in 1987. The endowment policy taken out in 1991 was to increase the size of my mortgage to finance my apartment move. Section 19 shows that I was offering my existing endowment policy as part of the financing of the increased mortgage, I was not discussing alternatives with a ***.

 You note that I had already held an A policy taken out in 1987. However, A have stated to you that I have not complained about this; and that, based on this statement you question why I am complaining about the 1991 policy. A’s statement to you is incorrect. I have complained to both A and your own organisation about the 1987 policy; the complaint was rejected because the policy was taken out pre 1988. I am at a loss understand why A have “forgotten” this, and have told you that I have not complained. I have copies of all correspondence with both A and yourselves; I am happy to provide you with these should you require them.

 You note that I currently hold shares, and that this indicates that I am an investor who is prepared to take some risk. I would note that when I took out the endowment polices in 1987 and 1991 I did not hold shares. To compare my current investment and risk attitude, with my investment and risk attitude of 12 or more years ago is akin to comparing apples to bananas; it is not a valid line of reasoning.

 You note that there is no guarantee in the A sales brochure that the mortgage will be paid off, and as such the “Denning judgement” is not applicable. I draw your attention to the following paragraph in the brochure:

“By taking out an A Build Up Mortgage plan you can be assured that you are making the right decision…investment into an endowment life assurance policy offers you the prospect of a substantial surplus cash sum after the mortgage has been repaid”.

The use of the word “assured” and phrase “after the mortgage has been repaid” makes it clear that the mortgage will be repaid. I contend that this constitutes a warranty, and that the “Denning judgement” applies.

In conclusion, there would be little point (for any rational individual) in taking out an endowment policy if it were not going to pay off the mortgage.

A marketed these polices like cars and TV’s; ie a product with a defined function, namely, to pay off the mortgage. A by selling them as a product with a defined function, not as an investment, have by definition mis-sold them. The policy has been shown to be not “fit for purpose” as it will not cover the mortgage; and as with any product, not “fit for purpose”, the supplier should compensate the consumer for defects in manufacture.

In view of the above points, I would like to ask you to re-evaluate your conclusion. Please feel free to contact me should you require further information.

Thank you in advance for your time and assistance in this matter...."