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.
Showing posts with label maturity. Show all posts
Showing posts with label maturity. Show all posts
Monday, November 26, 2012
Thursday, January 27, 2011
A Surplus!
A Surplus!
Ian Cowie, of the Telegraph, writes about his Legal and General endowment policy:
"..my 25-year with-profits endowment matured last month and paid out 33pc more than the target value.
Since you ask, the maturity forecast was £45,000 but the actual payout was a bit above £60,000..."
How nice for him!
My L&G policies both mature next year, and are forecast to make large losses.
How can there be such a difference between his L&G policy and mine, given that the maturity date is less than two years apart?
Ian Cowie, of the Telegraph, writes about his Legal and General endowment policy:
"..my 25-year with-profits endowment matured last month and paid out 33pc more than the target value.
Since you ask, the maturity forecast was £45,000 but the actual payout was a bit above £60,000..."
How nice for him!
My L&G policies both mature next year, and are forecast to make large losses.
How can there be such a difference between his L&G policy and mine, given that the maturity date is less than two years apart?
Thursday, July 09, 2009
Lautro 19 To Remain "Secret"
Lautro 19 To Remain "Secret"
Any hope of naming and shaming the Lautro 19 is now "dead and buried", according to former IFA Defence Union chief Evan Owen.
The Information Commissioner's office has stated that the High Court has ruled that the information falls under absolute exemption rules under the Freedom of Information Act, and therefore does not have to be disclosed.
The Information Commission ruled in August 2007 that the FSA had to name the mortgage endowment providers which misused Lautro projections in setting premiums, which lead to clients being given unrealistically high maturity figures (cynics might say that they were conned).
The hapless FSA, ever keen to protect the financial services industry from the consumer, appealed against the decision. In October 2008 the Information Tribunal rejected the FSA's appeal.
The FSA then took the appeal to the High Court, which upheld the appeal.
If only the FSA were as zealous when protecting the consumer!
Any hope of naming and shaming the Lautro 19 is now "dead and buried", according to former IFA Defence Union chief Evan Owen.
The Information Commissioner's office has stated that the High Court has ruled that the information falls under absolute exemption rules under the Freedom of Information Act, and therefore does not have to be disclosed.
The Information Commission ruled in August 2007 that the FSA had to name the mortgage endowment providers which misused Lautro projections in setting premiums, which lead to clients being given unrealistically high maturity figures (cynics might say that they were conned).
The hapless FSA, ever keen to protect the financial services industry from the consumer, appealed against the decision. In October 2008 the Information Tribunal rejected the FSA's appeal.
The FSA then took the appeal to the High Court, which upheld the appeal.
If only the FSA were as zealous when protecting the consumer!
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.
Tuesday, November 11, 2008
FSA Fights Lautro Ruling
FSA Fights Lautro Ruling
The Financial Services Authority (FSA) has appealed to the High Court over the Information Tribunals' decision to make them name and shame the Lautro 19.
The FSA argues that the information provided to it by the "Lautro 19" was confidential, and that it can't be disclosed.
The "Lautro 19" are endowment mortgage providers who misused Lautro projections to set unrealistically high maturity figures when selling their useless products to the unsuspecting public.
It is estimated that the number of policies affected by this number in the hundreds of thousands.
The FSA, by opposing the naming and shaming of the "Lautro 19", are failing in their duty to maintain an orderly and honest financial system; in other words the FSA is not fit for purpose.
The Financial Services Authority (FSA) has appealed to the High Court over the Information Tribunals' decision to make them name and shame the Lautro 19.
The FSA argues that the information provided to it by the "Lautro 19" was confidential, and that it can't be disclosed.
The "Lautro 19" are endowment mortgage providers who misused Lautro projections to set unrealistically high maturity figures when selling their useless products to the unsuspecting public.
It is estimated that the number of policies affected by this number in the hundreds of thousands.
The FSA, by opposing the naming and shaming of the "Lautro 19", are failing in their duty to maintain an orderly and honest financial system; in other words the FSA is not fit for purpose.
Saturday, September 20, 2008
Adviser Claims Foul by Norwich Union
Adviser Claims Foul by Norwich Union
The FT reports that Dolly Pickering, of Heather, Moor & Edgecomb (an IFA), has claimed that Norwich Union's change in projection calculations has led to an endowment misselling claim being brought against it.
Ms Pickering was informed of a £6K drop in the value of a client's policy, caused by an improvement to the accuracy of estimated maturity value (EMV) calculations.
Ms Pickering stated that it was unfair that IFAs were being punished for selling endowment policies, whose initial projected values were inaccurate, and holds the providers responsible.
The FT reports that Dolly Pickering, of Heather, Moor & Edgecomb (an IFA), has claimed that Norwich Union's change in projection calculations has led to an endowment misselling claim being brought against it.
Ms Pickering was informed of a £6K drop in the value of a client's policy, caused by an improvement to the accuracy of estimated maturity value (EMV) calculations.
Ms Pickering stated that it was unfair that IFAs were being punished for selling endowment policies, whose initial projected values were inaccurate, and holds the providers responsible.
Thursday, April 10, 2008
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.
Friday, August 31, 2007
The Lautro 12
The Lautro 12
The recently published shameful case of the so called "Lautro 12", appears to be causing more than a few ripples in the financial services industry.
It seems that the knock on effect of the "Lautro 12" is that many Independent Financial Advisers (IFAs) may have paid out too much compensation for mortgage endowment complaints.
Needless to say, if this were to be the case, they may themselves be entitled to financial compensation from the endowment providers.
The Lautro 12 were found to have mispriced Lautro premiums, which lead them to give their hapless customers unrealistically high maturity figures between 1988 and 1994.
Other providers have also mispriced projections but, unlike the 12, have not necessarily paid any consumer redress.
OAC Actuaries and Consultants chief executive, Roger Grenville-Jones, said:
"Where compensation for misselling has been paid, the amount of compensation is automatically increased to adjust for the policy being too small, at the expense of the firm paying the compensation, but only up to the present time."
Whilst the extra sums that advisers have had to pay out due to mispricing by providers is difficult to estimate, it is estimated that approximately £83M has been paid out in compensation for endowment misselling.
Compliance expert Adam Samuel said:
"Under-pricing will have reduced surrender values which are deducted from the amount required to repay the loan and other extra costs to produce the compensation amount.
If the insurers had set the premiums correctly, the surrender value would be higher and this would have brought down the compensation."
Shakespeare Putsman LLP partner Gareth Fatchett said:
"We have had a positive opinion from specialist counsel about taking action on behalf of advisers. It is arguable that redress by IFAs could be reclaimed against providers who are shown to have used incorrect charging assumptions. Potentially, this creates a whole raft of claims from IFA firms who have paid redress needlessly."
IFA Defence Union chairman Evan Owen sums this disgraceful farce very neatly:
"IFAs should not have had to waste time defending complaints, paying case fees triggered by false shortfalls and forking out compensation that others were responsible for. The providers must be held to account."
As this site has noted many times, the failure of these useless policies is down to their bad design; ie they were not fit for purpose. On that basis alone, it is most assuredly the endowment providers' responsibility to clear this mess up.
As I have noted many times before, were they to agree to underwrite these failed products that they foisted on an unsuspecting generation of house buyers, much of the distress being endured by their hapless customers and IFAs (unfairly caught in the middle) could have been avoided.
Anyone care to take any bets as to whether the endowment providers will "step up to the plate" and admit their responsibility?
The recently published shameful case of the so called "Lautro 12", appears to be causing more than a few ripples in the financial services industry.
It seems that the knock on effect of the "Lautro 12" is that many Independent Financial Advisers (IFAs) may have paid out too much compensation for mortgage endowment complaints.
Needless to say, if this were to be the case, they may themselves be entitled to financial compensation from the endowment providers.
The Lautro 12 were found to have mispriced Lautro premiums, which lead them to give their hapless customers unrealistically high maturity figures between 1988 and 1994.
Other providers have also mispriced projections but, unlike the 12, have not necessarily paid any consumer redress.
OAC Actuaries and Consultants chief executive, Roger Grenville-Jones, said:
"Where compensation for misselling has been paid, the amount of compensation is automatically increased to adjust for the policy being too small, at the expense of the firm paying the compensation, but only up to the present time."
Whilst the extra sums that advisers have had to pay out due to mispricing by providers is difficult to estimate, it is estimated that approximately £83M has been paid out in compensation for endowment misselling.
Compliance expert Adam Samuel said:
"Under-pricing will have reduced surrender values which are deducted from the amount required to repay the loan and other extra costs to produce the compensation amount.
If the insurers had set the premiums correctly, the surrender value would be higher and this would have brought down the compensation."
Shakespeare Putsman LLP partner Gareth Fatchett said:
"We have had a positive opinion from specialist counsel about taking action on behalf of advisers. It is arguable that redress by IFAs could be reclaimed against providers who are shown to have used incorrect charging assumptions. Potentially, this creates a whole raft of claims from IFA firms who have paid redress needlessly."
IFA Defence Union chairman Evan Owen sums this disgraceful farce very neatly:
"IFAs should not have had to waste time defending complaints, paying case fees triggered by false shortfalls and forking out compensation that others were responsible for. The providers must be held to account."
As this site has noted many times, the failure of these useless policies is down to their bad design; ie they were not fit for purpose. On that basis alone, it is most assuredly the endowment providers' responsibility to clear this mess up.
As I have noted many times before, were they to agree to underwrite these failed products that they foisted on an unsuspecting generation of house buyers, much of the distress being endured by their hapless customers and IFAs (unfairly caught in the middle) could have been avoided.
Anyone care to take any bets as to whether the endowment providers will "step up to the plate" and admit their responsibility?
Monday, August 20, 2007
Named and Shamed
Named and Shamed
The Financial Services Authority (FSA) is to be forced to name and shame the 12 endowment mortgage providers which misused Lautro projections in setting premiums.
Their misuse of the Lautro projections meant that customers were given unrealistically high maturity figures.
The FSA have been forced into the embarrassing climbdown by the Information Commissioner's Office, which has upheld a freedom of information request to name the 12 firms.
It is estimated that several hundred thousand policies could be affected by this ruling.
The FSA had stubbornly refused to name the firms, claiming that it would affect future informal reviews, damage market confidence and infringe the providers' rights. Proving once again that the FSA is an ineffectual body, that does not stand up for the consumer when faced with a conflict of interest.
The FSA conducted an informal mortgage endowment review in 2001 which found that between 1988 and 1994, 12 providers used standard Lautro charges to set premiums without informing consumers that their actual charges were higher. This meant consumers would need to pay higher premiums to meet their expected maturity figures.
The FSA said that the providers had "breached a contractual warranty and/or of material pre-contractual misrepresentation in the sale of endowment mortgages".
The FSA has been of little help to the victims of the endowment scandal. One has to ask, what is the point of the FSA?
The Financial Services Authority (FSA) is to be forced to name and shame the 12 endowment mortgage providers which misused Lautro projections in setting premiums.
Their misuse of the Lautro projections meant that customers were given unrealistically high maturity figures.
The FSA have been forced into the embarrassing climbdown by the Information Commissioner's Office, which has upheld a freedom of information request to name the 12 firms.
It is estimated that several hundred thousand policies could be affected by this ruling.
The FSA had stubbornly refused to name the firms, claiming that it would affect future informal reviews, damage market confidence and infringe the providers' rights. Proving once again that the FSA is an ineffectual body, that does not stand up for the consumer when faced with a conflict of interest.
The FSA conducted an informal mortgage endowment review in 2001 which found that between 1988 and 1994, 12 providers used standard Lautro charges to set premiums without informing consumers that their actual charges were higher. This meant consumers would need to pay higher premiums to meet their expected maturity figures.
The FSA said that the providers had "breached a contractual warranty and/or of material pre-contractual misrepresentation in the sale of endowment mortgages".
The FSA has been of little help to the victims of the endowment scandal. One has to ask, what is the point of the FSA?
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.
Monday, February 06, 2006
Standard Life Fails To Deliver
Standard Life Fails To Deliver
More bad news for people holding useless and underperforming endowment mortages.
Standard Life have warned their 2 million with-profits customers that policies maturing this month will pay out on average 5% less than before, on comparable policies; this is despite the fact that share prices are booming.
The annual bonus rates on conventional with-profits policies are unchanged, but terminal bonuses are down.
The maturity value of a Standard Life 50 a month, 25 year mortgage endowment policy is now £40,459 this month, that is a massive fall of 18% when compared to the same policy of £49,511 in February last year.
John Gill, Standard's UK life and pensions managing director finance, is quoted as saying:
"By smoothing returns, we have protected policyholders from the full drop in asset values between 2000 and 2002."
Others are not taken in by this pr hype.
Clive Scott-Hopkins, from independent financial advisers Towry Law, is quoted as saying:
"Standard Life is obviously losing its competitive edge with this very poor result. The Norwich Union typical endowment payout last month at £50,295 was 25% higher than these results."
Standard Life sold £7BN of equities in 2004 after guidance from the Financial Services Authority on "strengthening" its financial reserves.
The result being that it now unable to take advantage, or rather its hapless endowment policy holders are unable to take advantage, of the booming stock market.
Given the fact that other insurers have performed better than this (even if their endowment policy holders are also out of pocket), I would suggest that the holders of Standard Life policies should be considering asking some very hard questions indeed about the quality of management of their funds.
Indeed they may laso like to consider aksing some hard questions of the FSA, as to why it gave such absurd advice.
More bad news for people holding useless and underperforming endowment mortages.
Standard Life have warned their 2 million with-profits customers that policies maturing this month will pay out on average 5% less than before, on comparable policies; this is despite the fact that share prices are booming.
The annual bonus rates on conventional with-profits policies are unchanged, but terminal bonuses are down.
The maturity value of a Standard Life 50 a month, 25 year mortgage endowment policy is now £40,459 this month, that is a massive fall of 18% when compared to the same policy of £49,511 in February last year.
John Gill, Standard's UK life and pensions managing director finance, is quoted as saying:
"By smoothing returns, we have protected policyholders from the full drop in asset values between 2000 and 2002."
Others are not taken in by this pr hype.
Clive Scott-Hopkins, from independent financial advisers Towry Law, is quoted as saying:
"Standard Life is obviously losing its competitive edge with this very poor result. The Norwich Union typical endowment payout last month at £50,295 was 25% higher than these results."
Standard Life sold £7BN of equities in 2004 after guidance from the Financial Services Authority on "strengthening" its financial reserves.
The result being that it now unable to take advantage, or rather its hapless endowment policy holders are unable to take advantage, of the booming stock market.
Given the fact that other insurers have performed better than this (even if their endowment policy holders are also out of pocket), I would suggest that the holders of Standard Life policies should be considering asking some very hard questions indeed about the quality of management of their funds.
Indeed they may laso like to consider aksing some hard questions of the FSA, as to why it gave such absurd advice.
Friday, January 20, 2006
Norwich Reduces Payouts
Norwich Reduces Payouts
Norwich Union have dealt a body blow to their long suffering endowment mortgage policyholders, who have been warned to expect a low payout this year.
This is despite the fact that Norwich's main profits fund achieved an overall return of 17.7% before tax.
A policyholder with a 25-year, £50 a month Norwich Union endowment mortgage maturing this month will receive 4% less than he would have done if the policy were to have matured in 2005.
Norwich stated:
"In general, shorter-term policies show increases or small decreases compared to equivalent policies maturing a year ago, while those with a term of 20 and 25 years will generally be lower."
However, Norwich Union went on to say that in many cases an increase is seen when the surrender value of the policy a year ago is compared to the maturity value now.
Well of course it would, surrender values are normally lower than maturity values!
Please don't treat your policyholders in such a patronising manner.
Norwich Union have dealt a body blow to their long suffering endowment mortgage policyholders, who have been warned to expect a low payout this year.
This is despite the fact that Norwich's main profits fund achieved an overall return of 17.7% before tax.
A policyholder with a 25-year, £50 a month Norwich Union endowment mortgage maturing this month will receive 4% less than he would have done if the policy were to have matured in 2005.
Norwich stated:
"In general, shorter-term policies show increases or small decreases compared to equivalent policies maturing a year ago, while those with a term of 20 and 25 years will generally be lower."
However, Norwich Union went on to say that in many cases an increase is seen when the surrender value of the policy a year ago is compared to the maturity value now.
Well of course it would, surrender values are normally lower than maturity values!
Please don't treat your policyholders in such a patronising manner.
Monday, August 29, 2005
Further Endowment Confusion
Further Endowment Confusion
As if endowment policy holders were not confused and worried enough, there is now a report that suggests that some of the warnings of shortfalls may in fact be wrong.
According to Independent Financial Adviser, Alan Lakey of Highclere Financial Services, not all endowments linked to a mortgage, where red or amber warning letters have been issued, will suffer a shortfall.
In a report in Money Management magazine, he warns that some are being sent out where no real risk exists.
"What began as an exercise designed to advise policyholders of the probable maturity value of their plans, and the possible need to take remedial action, has since turned into a major bloodletting,".
Lakey makes the point that the typical reprojection letter appears to show the with profit endowment as off track, and unlikely to hit the relevant target. However, he points out that not all red or amber warning letters are issued on the same basis.
He also notes that the deluge of warnings has led to the creation of a compensation industry, designed to extract money from the hapless policy holders.
To my view the best way for the life assurance industry to restore some of their shattered credibility, and brand value, would be for them to unconditionally underwrite their endowment products.
This would, at a single stroke, eliminate the need for a compensation industry which is living off the misery of policy holders.
As if endowment policy holders were not confused and worried enough, there is now a report that suggests that some of the warnings of shortfalls may in fact be wrong.
According to Independent Financial Adviser, Alan Lakey of Highclere Financial Services, not all endowments linked to a mortgage, where red or amber warning letters have been issued, will suffer a shortfall.
In a report in Money Management magazine, he warns that some are being sent out where no real risk exists.
"What began as an exercise designed to advise policyholders of the probable maturity value of their plans, and the possible need to take remedial action, has since turned into a major bloodletting,".
Lakey makes the point that the typical reprojection letter appears to show the with profit endowment as off track, and unlikely to hit the relevant target. However, he points out that not all red or amber warning letters are issued on the same basis.
He also notes that the deluge of warnings has led to the creation of a compensation industry, designed to extract money from the hapless policy holders.
To my view the best way for the life assurance industry to restore some of their shattered credibility, and brand value, would be for them to unconditionally underwrite their endowment products.
This would, at a single stroke, eliminate the need for a compensation industry which is living off the misery of policy holders.
Tuesday, July 26, 2005
Misery For Scottish Widows
Misery For Scottish Widows
Bad news for those of you who hold with-profits policies with Scottish Widows, the maturity values of these policies have fallen again; despite the recovery of equity markets.
The value of an average 25-year with-profits contract has dropped in the past six months, rather worrying given the fact that the stock market has been rising.
Scottish Widows said that payouts were lower because funds were invested over different time periods, yielding different earnings.
It still expects its £18BN with-profits fund to produce a pre-tax investment return of 15% in the 12 months to end-June, compared to 7.3% in the same period the previous year.
However, the company warned that maturity payouts could continue to fall, even in years where positive investment returns were achieved.
The Widows have tried to explain the reason for the fall as being due to the returns on with-profits, which aim to smooth payouts by holding back some of the return in good years to pay out in the bad, as being historically "significantly higher" than those of late.
To my simple view that means that they were paying out too much in earlier years, and not applying the "smoothing principle" properly.
Now there are two possible reasons for this:
1 Poor management of the policy
2 Deliberate over payment to attract new customers and shareholders
A typical 25-year endowment with Scottish Widows, maturing on 1 August, dropped 2.8% on February and 7.4% on the year. A mortgage-linked endowment over the same period fell 2.8% in value since February and 8.1% over the past year.
Bad news for those of you who hold with-profits policies with Scottish Widows, the maturity values of these policies have fallen again; despite the recovery of equity markets.
The value of an average 25-year with-profits contract has dropped in the past six months, rather worrying given the fact that the stock market has been rising.
Scottish Widows said that payouts were lower because funds were invested over different time periods, yielding different earnings.
It still expects its £18BN with-profits fund to produce a pre-tax investment return of 15% in the 12 months to end-June, compared to 7.3% in the same period the previous year.
However, the company warned that maturity payouts could continue to fall, even in years where positive investment returns were achieved.
The Widows have tried to explain the reason for the fall as being due to the returns on with-profits, which aim to smooth payouts by holding back some of the return in good years to pay out in the bad, as being historically "significantly higher" than those of late.
To my simple view that means that they were paying out too much in earlier years, and not applying the "smoothing principle" properly.
Now there are two possible reasons for this:
1 Poor management of the policy
2 Deliberate over payment to attract new customers and shareholders
A typical 25-year endowment with Scottish Widows, maturing on 1 August, dropped 2.8% on February and 7.4% on the year. A mortgage-linked endowment over the same period fell 2.8% in value since February and 8.1% over the past year.
Wednesday, June 29, 2005
Norwich Union Raises Bonuses
Norwich Union Raises Bonuses
In a rare piece of good news, for some of those holding endowment policies, Norwich Union has announced that it will be raising bonuses on some of its with profits endowment policies.
This will be the first increase since 1991, that fact alone shows just how badly endowment policies have been performing.
As noted many times before; why were these polices, when they were obviously failing, still sold by the life assurance companies?
Norwich Union said that it had decided to raise the rates paid on certain with profits policies in the CGNU (which includes General Accident) and CULAC (Commercial Union) funds, on those with profits policies taken out before October 1998.
The bonus rates will be increased from 1% to 2% in the CGNU fund, and people in the CULAC fund will be paid 1.5% compared with 0.5% previously.
Norwich said all other bonus rates would remain unchanged, and that there would be no changes to the value of maturity payouts or the current levels of "market value reduction".
In a rare piece of good news, for some of those holding endowment policies, Norwich Union has announced that it will be raising bonuses on some of its with profits endowment policies.
This will be the first increase since 1991, that fact alone shows just how badly endowment policies have been performing.
As noted many times before; why were these polices, when they were obviously failing, still sold by the life assurance companies?
Norwich Union said that it had decided to raise the rates paid on certain with profits policies in the CGNU (which includes General Accident) and CULAC (Commercial Union) funds, on those with profits policies taken out before October 1998.
The bonus rates will be increased from 1% to 2% in the CGNU fund, and people in the CULAC fund will be paid 1.5% compared with 0.5% previously.
Norwich said all other bonus rates would remain unchanged, and that there would be no changes to the value of maturity payouts or the current levels of "market value reduction".
Wednesday, April 13, 2005
Abbey To Be Fined
Abbey To Be Fined
It seems that Abbey, owned by Banco Santander, is to be fined by the Financial Services Authority (FSA) over its endowment mortgage complaint procedures.
The FSA are now punishing providers for not only mis-selling endowment products, but also for failing to handle the complaints properly.
There have been two firms fined to date for mishandling complaints, Allied Dunbar and Friends Provident, both of which were fined £700K.
Despite warnings from the FSA it seems that a number of providers are content to ignore their duty to investors.
In other words, some life assurance companies don't "give a stuff" about the policy holders.
Complaints to the Financial Services Ombudsman are expected to pass 65,000 in the year to April 2005, and more than 700,000 policies are surrendered short of maturity each year.
It seems that Abbey, owned by Banco Santander, is to be fined by the Financial Services Authority (FSA) over its endowment mortgage complaint procedures.
The FSA are now punishing providers for not only mis-selling endowment products, but also for failing to handle the complaints properly.
There have been two firms fined to date for mishandling complaints, Allied Dunbar and Friends Provident, both of which were fined £700K.
Despite warnings from the FSA it seems that a number of providers are content to ignore their duty to investors.
In other words, some life assurance companies don't "give a stuff" about the policy holders.
Complaints to the Financial Services Ombudsman are expected to pass 65,000 in the year to April 2005, and more than 700,000 policies are surrendered short of maturity each year.
Sunday, January 30, 2005
New Rules
New Rules
The Financial Services Authority (FSA), has issued final rules and guidance to help ensure that with profits policyholders are treated fairly.
The rules are intended to increase the transparency, and accountability, of the life assurance industry. The rules cover ao:
Mick McAteer, principal policy advisor at Which?, believes that these rules represent a retrograde step; he argues that they put even more power, and discretion, into the hands of directors.
He goes on to point out that directors will be able to carry on protecting shareholder interests, by using with profits funds as a slush fund to pay compensation costs.
Quote:
"With profits policies which are still one of the riskiest products people can invest in. The FSA has done nothing meaningful to ensure that firms spell this out. Neither have they provided the necessary checks and balances to ensure that directing minds in the sector put consumers' interests on the same level as shareholders..".
The Financial Services Authority (FSA), has issued final rules and guidance to help ensure that with profits policyholders are treated fairly.
The rules are intended to increase the transparency, and accountability, of the life assurance industry. The rules cover ao:
- The costs charged to a with profits fund, by the firm managing the fund
- Penalties levied on policyholders, who surrender their policies early
- The need for funds to be managed, to ensure maturity payouts fall within a target range set for the fund
- The requirement that information be presented to policyholders, or potential policyholders, in a format they can more readily understand
- Firms must provide information to with profits policyholders within 28 working days of a decision to close a fund to new business
- A policyholder advocate will be appointed to protect the interests of policyholders
Mick McAteer, principal policy advisor at Which?, believes that these rules represent a retrograde step; he argues that they put even more power, and discretion, into the hands of directors.
He goes on to point out that directors will be able to carry on protecting shareholder interests, by using with profits funds as a slush fund to pay compensation costs.
Quote:
"With profits policies which are still one of the riskiest products people can invest in. The FSA has done nothing meaningful to ensure that firms spell this out. Neither have they provided the necessary checks and balances to ensure that directing minds in the sector put consumers' interests on the same level as shareholders..".
Tuesday, January 04, 2005
Judgement Day
Judgement Day
The long awaited judgement, in the case of the FSA vs Legal and General (L&G) will be announced around the 10th of January.
The Financial Services and Markets Tribunal said that the delay in announcing their judgement, was due to sickness and holidays.
L&G went to the tribunal in 2004, in the hope of overturning the £1.1M fine imposed on it by the FSA for endowment mis-selling.
The FSA claimed that there were "fundamental deficiencies" in the way that L&G sold mortgage endowments to low-risk customers, between 1997 and 1999; specifically, their sales and compliance procedures were found to be wanting.
It is reported that customers were given unsuitable recommendations by sales people.
An internal memo at L&G admitted, that the policies had "a very real risk of shortfall at maturity". The FSA also detailed how L&G had failed its own mock regulatory inspections.
The 5 week hearing ended in October, the FSA and insurance industry having been holding their breath ever since.
Should L&G win the case, then the credibility of the FSA would take a severe "hammering". It would also act as the green light for other insurance companies to challenge decisions, and fines imposed upon them by the FSA.
However, should the FSA win it would provide a boost for its reputation and provide a firm underpinning of John Tiner's position as CEO. Whereas the CEO of L&G, David Prosser, may well have to resign.
We, the hapless holders of these underperforming and useless endowment policies, wait with baited breath.
The long awaited judgement, in the case of the FSA vs Legal and General (L&G) will be announced around the 10th of January.
The Financial Services and Markets Tribunal said that the delay in announcing their judgement, was due to sickness and holidays.
L&G went to the tribunal in 2004, in the hope of overturning the £1.1M fine imposed on it by the FSA for endowment mis-selling.
The FSA claimed that there were "fundamental deficiencies" in the way that L&G sold mortgage endowments to low-risk customers, between 1997 and 1999; specifically, their sales and compliance procedures were found to be wanting.
It is reported that customers were given unsuitable recommendations by sales people.
An internal memo at L&G admitted, that the policies had "a very real risk of shortfall at maturity". The FSA also detailed how L&G had failed its own mock regulatory inspections.
The 5 week hearing ended in October, the FSA and insurance industry having been holding their breath ever since.
Should L&G win the case, then the credibility of the FSA would take a severe "hammering". It would also act as the green light for other insurance companies to challenge decisions, and fines imposed upon them by the FSA.
However, should the FSA win it would provide a boost for its reputation and provide a firm underpinning of John Tiner's position as CEO. Whereas the CEO of L&G, David Prosser, may well have to resign.
We, the hapless holders of these underperforming and useless endowment policies, wait with baited breath.
Friday, November 26, 2004
Obstructive Unhelpful Delaying Tactics
You will recall that, on the 12th of November, I sent my life assurance company a letter asking about commission payments made from my two endowment policies.
Here is the letter that I sent:
"Dear Sir/Madam,
Endowment Policies (numbers **** and ****)
I have a number of queries concerning my two endowment policies (numbers **** and ***), which you manage on my behalf.
Please can you answer the following queries in respect of the above policies:
1. Please can you advise me as to how much commission has been paid to any third party, or connected party, at the time the policies were taken out?
2. Please can you advise me of the names of the companies to which commission payments have been made, in respect of these policies?
3. Please can you advise me if commission payments have been made, at dates other than at the commencement of the policies?
4. If so please can you quantify the amounts, the frequency and the organisations to which these additional commission payments have been/are being made?
5. Please can you advise me if the commission payments referred to in questions 1- 4 above were deducted directly from my policy payments, or have been charged indirectly?
6. If commission payments are still being made on my policies, please can you advise me as to why?
7. Do I have the right to stop these ongoing commission payments?
8. If I have the right to stop these ongoing commission payments, please can you explain as to why you have not drawn this to my attention before?
9. Please can you provide me with an estimate as to negative impact, on the final expected maturity value of my policies, which these payments have had?
Please feel free to contact me if you need clarification of the above.
Thank you in advance for your prompt co-operation.
Yours faithfully..."
Today I received their response; which, not to put too fine a point on it, I regard as obstructive and unhelpful.
Here is their response:
"Thanks you for your letter of 11 November, asking how much commission is being paid monthly to the adviser.
The policy *** was sold by **, direct sales office, South London branch. If you have any queries concerning the sale of these policies please contact us at the above address (note they do not supply the address in the letter, they are the same company why not just pass my letter on?).
You took out plan (**) before 1 January 1995, when the current commission disclosure rules came into force. I cannot give you details of the commission paid to the selling agent without the agent's permission in writing. In order to obtain the commission information therefore, we suggest that you contact your adviser direct (it is my money, yet they will not tell me how much they are taking!).
...."
I will follow this up.
I do not consider that their response has been at all helpful; it leaves me to wonder precisely what they are hiding.
You will recall that, on the 12th of November, I sent my life assurance company a letter asking about commission payments made from my two endowment policies.
Here is the letter that I sent:
"Dear Sir/Madam,
Endowment Policies (numbers **** and ****)
I have a number of queries concerning my two endowment policies (numbers **** and ***), which you manage on my behalf.
Please can you answer the following queries in respect of the above policies:
1. Please can you advise me as to how much commission has been paid to any third party, or connected party, at the time the policies were taken out?
2. Please can you advise me of the names of the companies to which commission payments have been made, in respect of these policies?
3. Please can you advise me if commission payments have been made, at dates other than at the commencement of the policies?
4. If so please can you quantify the amounts, the frequency and the organisations to which these additional commission payments have been/are being made?
5. Please can you advise me if the commission payments referred to in questions 1- 4 above were deducted directly from my policy payments, or have been charged indirectly?
6. If commission payments are still being made on my policies, please can you advise me as to why?
7. Do I have the right to stop these ongoing commission payments?
8. If I have the right to stop these ongoing commission payments, please can you explain as to why you have not drawn this to my attention before?
9. Please can you provide me with an estimate as to negative impact, on the final expected maturity value of my policies, which these payments have had?
Please feel free to contact me if you need clarification of the above.
Thank you in advance for your prompt co-operation.
Yours faithfully..."
Today I received their response; which, not to put too fine a point on it, I regard as obstructive and unhelpful.
Here is their response:
"Thanks you for your letter of 11 November, asking how much commission is being paid monthly to the adviser.
The policy *** was sold by **, direct sales office, South London branch. If you have any queries concerning the sale of these policies please contact us at the above address (note they do not supply the address in the letter, they are the same company why not just pass my letter on?).
You took out plan (**) before 1 January 1995, when the current commission disclosure rules came into force. I cannot give you details of the commission paid to the selling agent without the agent's permission in writing. In order to obtain the commission information therefore, we suggest that you contact your adviser direct (it is my money, yet they will not tell me how much they are taking!).
...."
I will follow this up.
I do not consider that their response has been at all helpful; it leaves me to wonder precisely what they are hiding.
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