99% Shortfall
This Is Money reports that a staggering 99% of endowment policies will fail to pay off the mortgages which they were designed to cover.
With over 4.3M policies still in force this means that millions of people will be affected by the failure of these useless products.
The FSA and the life assurance companies that "manage" these failed products continue to hide behind the excuse that, as they are investments, the consumer knowingly accepted the risk that they might not cover the mortgage.
This excuse is not valid, as the life assurance companies told the hapless consumer that they were designed to pay off their mortgages. Why else would anyone have bought these products if they were not going to fulfil their primary function of paying off a mortgage?
The fact 99% of them will fail to do this is proof that the product was poorly designed, and continues to be atrociously "managed" (eg why do life assurance companies continue to milk the policies of commissions, when they have demonstrably failed?).
The consumer has been ripped off by the life assurance industry, and left to rot by the FSA.
Showing posts with label Standard Life. Show all posts
Showing posts with label Standard Life. Show all posts
Thursday, July 16, 2009
Wednesday, January 07, 2009
Bonus Cuts
Bonus Cuts
The Times warns that holders of with profits funds will find that their maturity values will be cut again this year, because of poor performance.
Friends Provident will announce bonuses this week, Norwich Union next week.
Standard Life will declare at the end of this month, with Prudential and Legal & General making their announcements in February.
Many "with profits" (a contradiction in terms) policy holders are of course relying on these policies to pay off their endowment mortgages. A fine example, among many (eg PPI, credit card charges, bank charges, commissions etc), of how the City has ripped off the ordinary British citizen.
The Times warns that holders of with profits funds will find that their maturity values will be cut again this year, because of poor performance.
Friends Provident will announce bonuses this week, Norwich Union next week.
Standard Life will declare at the end of this month, with Prudential and Legal & General making their announcements in February.
Many "with profits" (a contradiction in terms) policy holders are of course relying on these policies to pay off their endowment mortgages. A fine example, among many (eg PPI, credit card charges, bank charges, commissions etc), of how the City has ripped off the ordinary British citizen.
Monday, May 26, 2008
Standard Life Rejects Fund Call
Standard Life Rejects Fund Call
Standard Life has rejected a call to use £100M a year from its profits to fund a programme to cover the firm's endowment policy "black hole".
The call to build up a fund to cover the shortfalls of with-profits mortgage endowments, came at the company's annual general meeting in Edinburgh last week.
Alastair McClelland, a Standard Life shareholder, used the AGM to demand that the company set aside £100m a year over ten years into the firm's "with-profits fund".
Standard Life chairman Gerry Grimstone argued that the problems with with-profits policies were a legacy of the company's mutual past.
In 2000 Standard Life promised that it would meet any shortfall policyholders faced on their endowment policies. However, when the company got into solvency problems, the promise was changed in 2004 to a guarantee of paying only a proportion of shortfalls.
Standard Life has rejected a call to use £100M a year from its profits to fund a programme to cover the firm's endowment policy "black hole".
The call to build up a fund to cover the shortfalls of with-profits mortgage endowments, came at the company's annual general meeting in Edinburgh last week.
Alastair McClelland, a Standard Life shareholder, used the AGM to demand that the company set aside £100m a year over ten years into the firm's "with-profits fund".
Standard Life chairman Gerry Grimstone argued that the problems with with-profits policies were a legacy of the company's mutual past.
In 2000 Standard Life promised that it would meet any shortfall policyholders faced on their endowment policies. However, when the company got into solvency problems, the promise was changed in 2004 to a guarantee of paying only a proportion of shortfalls.
Thursday, April 10, 2008
Thursday, March 06, 2008
Pass The Parcel
Pass The Parcel
The endowment scandal has created a legal version of pass the parcel as policyholders claim damages from those who mis-sold these useless products and they, in turn, claim damages from insurance companies etc.
Legal Week recently reported that Reynolds Porter Chamberlain (RPC) is facing a multimillion-pound negligence claim relating to its involvement in a case brought by Standard Life.
Standard Life Assurance recently won a case against AON, and stands to be awarded up to £75M.
Aon has brought its own negligence claim against RPC, as a third party to the proceedings, and a second trial will now take place to decide whether or not the firm was negligent.
Aon's claim against RPC argues that the firm did not recognise that the wording of the policy meant claims could not be grouped together.
Now don't you think that all this trouble, time and expense could be avoided if the life assurance companies simply underwrote these useless, underperforming and badly managed polices?
The endowment scandal has created a legal version of pass the parcel as policyholders claim damages from those who mis-sold these useless products and they, in turn, claim damages from insurance companies etc.
Legal Week recently reported that Reynolds Porter Chamberlain (RPC) is facing a multimillion-pound negligence claim relating to its involvement in a case brought by Standard Life.
Standard Life Assurance recently won a case against AON, and stands to be awarded up to £75M.
Aon has brought its own negligence claim against RPC, as a third party to the proceedings, and a second trial will now take place to decide whether or not the firm was negligent.
Aon's claim against RPC argues that the firm did not recognise that the wording of the policy meant claims could not be grouped together.
Now don't you think that all this trouble, time and expense could be avoided if the life assurance companies simply underwrote these useless, underperforming and badly managed polices?
Wednesday, February 27, 2008
Sauce For The Goose
Sauce For The Goose
It is refreshing to read for once a story about a life assurance company suing a broker for mis-selling, rather than an endowment policy holder suing a broker or life assurance company.
In this particular case Standard Life sued brokers Aon for advising it to take out the wrong indemnity insurance, to cover claims for mis-selling of mortgage endowments policies.
I would venture to suggest that had they not mis-sold the policies in the first place, they would not have needed to take the cover out!
Standard Life won the case and stands to gain £75M, the final amount will be determined at another hearing.
The judge ruled that Aon had been negligent, as no reasonably competent broker could have concluded that Standard Life's needs were clearly met by the policy.
I can't but help feel a small amount of shadenfreude over this.
Now at least one life insurance company may know what the millions of us, who were sold these useless underperforming endowments, feel like.
It is refreshing to read for once a story about a life assurance company suing a broker for mis-selling, rather than an endowment policy holder suing a broker or life assurance company.
In this particular case Standard Life sued brokers Aon for advising it to take out the wrong indemnity insurance, to cover claims for mis-selling of mortgage endowments policies.
I would venture to suggest that had they not mis-sold the policies in the first place, they would not have needed to take the cover out!
Standard Life won the case and stands to gain £75M, the final amount will be determined at another hearing.
The judge ruled that Aon had been negligent, as no reasonably competent broker could have concluded that Standard Life's needs were clearly met by the policy.
I can't but help feel a small amount of shadenfreude over this.
Now at least one life insurance company may know what the millions of us, who were sold these useless underperforming endowments, feel like.
Monday, December 10, 2007
Underwater
Underwater
Scotland on Sunday reports that two of the UK's largest endowment companies, Standard Life and Norwich, now have a staggering 1.4 million endowment policies underwater.
Guardian, which sold endowments for Nationwide, refused to take part in the survey. A spokeswoman for the company claimed that the omission was due to "an administrative oversight".
The report goes on to state that 90% of Norwich Union's 764,609 policyholders are now receiving red letters, while at Standard Life the proportion is 88%. At Friends Provident, 89% are in the red.
It's going to be a bleak Christmas for endowment policy holders.
Scotland on Sunday reports that two of the UK's largest endowment companies, Standard Life and Norwich, now have a staggering 1.4 million endowment policies underwater.
Guardian, which sold endowments for Nationwide, refused to take part in the survey. A spokeswoman for the company claimed that the omission was due to "an administrative oversight".
The report goes on to state that 90% of Norwich Union's 764,609 policyholders are now receiving red letters, while at Standard Life the proportion is 88%. At Friends Provident, 89% are in the red.
It's going to be a bleak Christmas for endowment policy holders.
Friday, October 19, 2007
Repayments
Repayments
There appears to be something of a sting in the tail for some long suffering endowment holders who make a successful mis-selling claim through the Financial Ombudsman Service (FOS), and then find that in fact their endowment policy recovers to leave no shortfall.
In the event that happens, the policy holder may have to repay money to their adviser.
A county court in Wales has ordered the claimant to pay back the sum of £1689, if their endowment manages to hit its original target of £13,000 in May 2010.
In September the FOS ordered retired independent financial adviser Eifion Hughes to pay the compensation to his client. However, Hughes refused to pay stating that the ombudsman had come to the wrong decision.
In an unpleasant irony, Hughes was then taken to court by the client who was being advised by an IFA acting as a claim-chaser.
The judge has upheld the complaint, but stipulated that the money would have to be paid back to the adviser on the policy's maturity if it reached above its expected value.
Hughes is quoted in The Herald as saying:
"At last this appears to be a victory for common sense. If the client loses out and it is the adviser's fault, he should pay out, but if there is no loss and perhaps even an extra gain, why should the adviser have to offer them money? Natural justice has won the day."
Evan Owen, chairman of the IFA Defence Union, said:
"It is refreshing to see the people who administer the law of the land reaching such conclusions. Let us hope that Lord Hunt takes this view on board as part of his review."
Quite right too!
As to whether many endowment polices will actually meet their targets, is open to conjecture. I can personally state that the two polices I hold with legal & General look very unlikely to get anywhere near their target.
It is also reported that almost 90% of Standard Life mortgage endowments are still highly unlikely to meet their targets.
However, I would also note that to some extent the IFA's (unless they were proven to be negligent) should not be the target of policy holders' wrath.
These lousy products were sold in the same manner as cars, TV's and other consumer products. Their sole purpose being to pay off the mortgage.
As a result of hidden/excess charges, lousy management and misrepresentation of the prospects by the funds themselves, they are massively underperfomring.
They are not fit for purpose.
It should not be the IFA's that are targeted, but the fund managers. The only solution to this shameful scandal is for the fund mangers to underwrite their useless, badly managed, products.
There appears to be something of a sting in the tail for some long suffering endowment holders who make a successful mis-selling claim through the Financial Ombudsman Service (FOS), and then find that in fact their endowment policy recovers to leave no shortfall.
In the event that happens, the policy holder may have to repay money to their adviser.
A county court in Wales has ordered the claimant to pay back the sum of £1689, if their endowment manages to hit its original target of £13,000 in May 2010.
In September the FOS ordered retired independent financial adviser Eifion Hughes to pay the compensation to his client. However, Hughes refused to pay stating that the ombudsman had come to the wrong decision.
In an unpleasant irony, Hughes was then taken to court by the client who was being advised by an IFA acting as a claim-chaser.
The judge has upheld the complaint, but stipulated that the money would have to be paid back to the adviser on the policy's maturity if it reached above its expected value.
Hughes is quoted in The Herald as saying:
"At last this appears to be a victory for common sense. If the client loses out and it is the adviser's fault, he should pay out, but if there is no loss and perhaps even an extra gain, why should the adviser have to offer them money? Natural justice has won the day."
Evan Owen, chairman of the IFA Defence Union, said:
"It is refreshing to see the people who administer the law of the land reaching such conclusions. Let us hope that Lord Hunt takes this view on board as part of his review."
Quite right too!
As to whether many endowment polices will actually meet their targets, is open to conjecture. I can personally state that the two polices I hold with legal & General look very unlikely to get anywhere near their target.
It is also reported that almost 90% of Standard Life mortgage endowments are still highly unlikely to meet their targets.
However, I would also note that to some extent the IFA's (unless they were proven to be negligent) should not be the target of policy holders' wrath.
These lousy products were sold in the same manner as cars, TV's and other consumer products. Their sole purpose being to pay off the mortgage.
As a result of hidden/excess charges, lousy management and misrepresentation of the prospects by the funds themselves, they are massively underperfomring.
They are not fit for purpose.
It should not be the IFA's that are targeted, but the fund managers. The only solution to this shameful scandal is for the fund mangers to underwrite their useless, badly managed, products.
Tuesday, September 18, 2007
The Curate's Egg
The Curate's Egg
The Telegraph reports that around 260,000 extra mortgage endowment holders have seen their policies meet their targets in the past year.
It seems that buoyant stock market has helped some policies recover their lost ground over the past few years. However, as to whether a particular policy that had previously been deemed to fail to meet target will now hit target very much depends on a number of variables; not least the quality of the company that is managing the endowment policy.
The Telegraph notes that, eg:
"Prudential's fund has been strong. The proportion of its policies that are red has significantly reduced over that period too. In 2003, 44 per cent of its policies were flagged up as red, now the figure is 15 per cent of the remaining 201,000 policies.
To date none of the Prudential's policies has failed to pay out the full target amount."
Those with Scottish Amicable have also seen an improvement. In 2003, Scottish Amicable had 65% of its policies listed as red, this figure now stands at 10%.
However, those who hold Legal and General policies have not been so fortunate. In 2004 over 55% of its policies were expected to fail to meet their repayment value. The figure now stands at 40%.
Standard Life is even worse, as it has seen its red policies rise from 86% to 88%.
As can be seen from the above, the performance is very much dependent on the "quality" of the fund managers.
The Telegraph reports that around 260,000 extra mortgage endowment holders have seen their policies meet their targets in the past year.
It seems that buoyant stock market has helped some policies recover their lost ground over the past few years. However, as to whether a particular policy that had previously been deemed to fail to meet target will now hit target very much depends on a number of variables; not least the quality of the company that is managing the endowment policy.
The Telegraph notes that, eg:
"Prudential's fund has been strong. The proportion of its policies that are red has significantly reduced over that period too. In 2003, 44 per cent of its policies were flagged up as red, now the figure is 15 per cent of the remaining 201,000 policies.
To date none of the Prudential's policies has failed to pay out the full target amount."
Those with Scottish Amicable have also seen an improvement. In 2003, Scottish Amicable had 65% of its policies listed as red, this figure now stands at 10%.
However, those who hold Legal and General policies have not been so fortunate. In 2004 over 55% of its policies were expected to fail to meet their repayment value. The figure now stands at 40%.
Standard Life is even worse, as it has seen its red policies rise from 86% to 88%.
As can be seen from the above, the performance is very much dependent on the "quality" of the fund managers.
Friday, August 24, 2007
The List of Shame
The List of Shame
Congratulations to Money Management magazine for naming and shaming the insurance companies and endowment providers, who tired to hoodwink their customers, that the Financial Services Authority (FSA) tried to cover up.
When these shamed companies sold their products to their unsuspecting customers they used industry standard charges laid down by Lautro, the industry regulator at the time, to show the returns etc that would be expected on the policies..
However, their actual charges levied by these shamed companies were often much higher sometimes double the Lautro rate. Needless to say, they chose not to tell their customers this. This shoddy practice took place between 1988 and 1995.
It is estimated that around 200,000 policyholders, with low-cost mortgage endowments, could be owed up to £200m by these companies as a result of this practice.
The list of shame includes:
-Standard Life
-Pearl
-Axa
-Scottish Widows
-Prudential, owned Scottish Amicable
-Scottish Mutual
-Scottish Provident, now owned by Resolution.
Companies were taking up to 0.75% a year in charges from the fund. However, their customers were given the impression that the charge was only 0.3% (ie less than half).
Some companies, including Axa, Legal & General and Clerical Medical, have set aside money to make good these shortfalls. Others, such as Standard Life, have so far refused.
Shoddy practice by a very shoddy industry, and a disgraceful attempted cover up by a toothless partisan FSA.
It is hardly surprising that the British consumer has lost all faith in the financial services industry.
Congratulations to Money Management magazine for naming and shaming the insurance companies and endowment providers, who tired to hoodwink their customers, that the Financial Services Authority (FSA) tried to cover up.
When these shamed companies sold their products to their unsuspecting customers they used industry standard charges laid down by Lautro, the industry regulator at the time, to show the returns etc that would be expected on the policies..
However, their actual charges levied by these shamed companies were often much higher sometimes double the Lautro rate. Needless to say, they chose not to tell their customers this. This shoddy practice took place between 1988 and 1995.
It is estimated that around 200,000 policyholders, with low-cost mortgage endowments, could be owed up to £200m by these companies as a result of this practice.
The list of shame includes:
-Standard Life
-Pearl
-Axa
-Scottish Widows
-Prudential, owned Scottish Amicable
-Scottish Mutual
-Scottish Provident, now owned by Resolution.
Companies were taking up to 0.75% a year in charges from the fund. However, their customers were given the impression that the charge was only 0.3% (ie less than half).
Some companies, including Axa, Legal & General and Clerical Medical, have set aside money to make good these shortfalls. Others, such as Standard Life, have so far refused.
Shoddy practice by a very shoddy industry, and a disgraceful attempted cover up by a toothless partisan FSA.
It is hardly surprising that the British consumer has lost all faith in the financial services industry.
Friday, August 03, 2007
A Slice of The Pie
A Slice of The Pie
Standard Life has promised its two million policyholders a windfall payout from its £1.3BN orphan fund pot, surplus cash held in its with-profits fund.
Standard Life said that it would pay the cash to qualifying policyholders as their policies matured, rather than paying out one lump sum to all its customers in one go.
The orphaned assets are pots of surplus cash that inflate insurers' solvency figures.
Aviva, parent company of Norwich Union, will divide its £4BN orphan assets between shareholders and policyholders and Prudential is also considering what to do with its pot of surplus assets, worth £9BN.
A Standard Life spokesman told The Times:
"When other insurers, such as AXA, distributed their orphan assets, they made a one-off payment to all policyholders.
We are taking a different approach and are giving enhanced payouts when a policy reaches maturity, or when it is surrendered or transferred.
We are doing this because we want to retain some of this cash cushion over the life of our policies, some of which have decades to run."
This approach means that investors will be forced to keep their policies until maturity, if they wish to receive their share of the pot.
Standard Life has promised its two million policyholders a windfall payout from its £1.3BN orphan fund pot, surplus cash held in its with-profits fund.
Standard Life said that it would pay the cash to qualifying policyholders as their policies matured, rather than paying out one lump sum to all its customers in one go.
The orphaned assets are pots of surplus cash that inflate insurers' solvency figures.
Aviva, parent company of Norwich Union, will divide its £4BN orphan assets between shareholders and policyholders and Prudential is also considering what to do with its pot of surplus assets, worth £9BN.
A Standard Life spokesman told The Times:
"When other insurers, such as AXA, distributed their orphan assets, they made a one-off payment to all policyholders.
We are taking a different approach and are giving enhanced payouts when a policy reaches maturity, or when it is surrendered or transferred.
We are doing this because we want to retain some of this cash cushion over the life of our policies, some of which have decades to run."
This approach means that investors will be forced to keep their policies until maturity, if they wish to receive their share of the pot.
Tuesday, May 29, 2007
Standard Life Ignore Policy Holders
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?
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?
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, 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?
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