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.
Showing posts with label mortgages. Show all posts
Showing posts with label mortgages. Show all posts
Monday, November 05, 2012
Sunday, September 30, 2012
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."
Wednesday, June 27, 2012
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."
Thursday, May 24, 2012
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?
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?
Monday, April 23, 2012
The Endowment Shortfall Timebomb
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.
Source The Independent
Source The Independent
Wednesday, April 11, 2012
The Endowment Timebomb
Legal & General (L&G) have warned that there will be a peak in with profits (a misnomer if ever there was one) mortgage endowment maturities in 2013, with most of them showing a shortfall.
Legal & General state that (based on its figures) 86% of policyholders are in the red, and that 46,000 L&G policies will mature next year.
Given that many people have not put aside enough money to meet these shortfalls, next year will pose the risk of a severe destabilisation of the housing market.
Legal & General state that (based on its figures) 86% of policyholders are in the red, and that 46,000 L&G policies will mature next year.
Given that many people have not put aside enough money to meet these shortfalls, next year will pose the risk of a severe destabilisation of the housing market.
Monday, November 07, 2011
Delaying Tactics?
My thanks to the loyal reader who dropped me a note (see below) about possible delaying tactics used by some endowment companies.
Has anyone experienced delays in receiving payments from endowment companies for policies that have matured?
I have redacted the names of the companies to which he has referred.
"I took out a £30K endowment with **** in 1987 and after 25 years it matured on August the 1st just under £32k not the promised - hinted at- confident 40-50k but at least its over 30k.
My issue is getting them to pay me - are you aware of a delaying tactic or policy on holding off on paying people?
They claim its the *** (another company) but I feel like I am just getting the run around?"
Has anyone experienced delays in receiving payments from endowment companies for policies that have matured?
I have redacted the names of the companies to which he has referred.
"I took out a £30K endowment with **** in 1987 and after 25 years it matured on August the 1st just under £32k not the promised - hinted at- confident 40-50k but at least its over 30k.
My issue is getting them to pay me - are you aware of a delaying tactic or policy on holding off on paying people?
They claim its the *** (another company) but I feel like I am just getting the run around?"
Tuesday, October 04, 2011
A Crock of Shite
How "nice", Legal & General (L&G) wrote to me yesterday advising me that one of my "with profits" (a misnomer if ever there was one) endowment polices that I have with them will experience a shortfall.
The policy, which was taken out in 1991, will mature next year.
Its target was £39,700.
The expected shortfall, depending on whether the investment return is between 4%-8% (fat chance in today's markets!), is expected to be between £13K and £14K.
That's a shortfall of between 32%-35%!
Given that the whole point of these rip off policies was to pay off a mortgage debt, I am less than "impressed" with the performance of this product.
The good news is that L&G make a nice little earner from management charges for "manging" this crock of shite.
They even suggest, as one possible solution for making up the shortfall, that I extend the term or top it up!!!!!!!!!!!!!
Let us not forget that the purpose of these shite products was to pay off mortgage debts, they have failed.
Therefore the products are faulty.
I am amazed that no one has yet brought a class action against the companies who "manage" these failed products.
If there are any law companies out there who want to try a class action, feel free to contact me.
The policy, which was taken out in 1991, will mature next year.
Its target was £39,700.
The expected shortfall, depending on whether the investment return is between 4%-8% (fat chance in today's markets!), is expected to be between £13K and £14K.
That's a shortfall of between 32%-35%!
Given that the whole point of these rip off policies was to pay off a mortgage debt, I am less than "impressed" with the performance of this product.
The good news is that L&G make a nice little earner from management charges for "manging" this crock of shite.
They even suggest, as one possible solution for making up the shortfall, that I extend the term or top it up!!!!!!!!!!!!!
Let us not forget that the purpose of these shite products was to pay off mortgage debts, they have failed.
Therefore the products are faulty.
I am amazed that no one has yet brought a class action against the companies who "manage" these failed products.
If there are any law companies out there who want to try a class action, feel free to contact me.
Wednesday, June 08, 2011
The £300BN With Profits Scandal
The Telegraph reports that there is over £330BN sitting in the now discredited with profits (a misnomer if ever there was one) investment funds.
Investors were duped into putting money into these funds on the false promise of high returns that would pay pensions, cover mortgages and provide a nest egg.
Money Management claim that these useless funds have grown by an average of 1.7% per annum over the last 10 years. Higher returns would have been achievable simply by putting the money into a savings account.
Those with money in these useless and underperforming funds are, in effect, trapped as the exit fees are extortionate.
Investors were duped into putting money into these funds on the false promise of high returns that would pay pensions, cover mortgages and provide a nest egg.
Money Management claim that these useless funds have grown by an average of 1.7% per annum over the last 10 years. Higher returns would have been achievable simply by putting the money into a savings account.
Those with money in these useless and underperforming funds are, in effect, trapped as the exit fees are extortionate.
Wednesday, March 30, 2011
Shortfalls For Royal London and Scottish Life
This Is Money reports that with-profits (a misleading description if ever there was one) mortgage endowments with Royal London Mutual and Scottish Life will face a shortfall when their policies mature.
Hapless holders of 25 year £50 per month with-profits policies from Royal London Mutual will face a fall on policies maturing this year of 3.3%, compared with the previous year.
Scottish Life, which is part of Royal London Mutual, offers a worse return (4% down).
95% of all mortgage endowment policyholders at Scottish Life will face a shortfall, 53% of those with Royal London.
Lousy results from a lousy product.
Hapless holders of 25 year £50 per month with-profits policies from Royal London Mutual will face a fall on policies maturing this year of 3.3%, compared with the previous year.
Scottish Life, which is part of Royal London Mutual, offers a worse return (4% down).
95% of all mortgage endowment policyholders at Scottish Life will face a shortfall, 53% of those with Royal London.
Lousy results from a lousy product.
Monday, March 07, 2011
L&G Endowments Above Target?
Legal & General recently announced that mortgage endowment policies maturing this year will pay out more than was originally predicted when the policies were taken out 25 years ago.
Seemingly, if L&G's projections are correct, someone who paid £50 a month into one of the policies for 25 years will receive £34,750 (£372 above the target amount).
This optimistic announcement contrasts somewhat sharply with the September client mailing carried out by L&G, in which 81% of its mortgage endowment customers received red letters.
Don't crack open the champagne, until you receive your payout.
Seemingly, if L&G's projections are correct, someone who paid £50 a month into one of the policies for 25 years will receive £34,750 (£372 above the target amount).
This optimistic announcement contrasts somewhat sharply with the September client mailing carried out by L&G, in which 81% of its mortgage endowment customers received red letters.
Don't crack open the champagne, until you receive your payout.
Friday, February 25, 2011
FSA Finally Acts - Maybe
The Financial Services Authority (FSA) has finally published its review into rules on with-profits investments, and announced its intention to toughen up its rules.
The FSA has finally admitted that with-profits policyholders "are not always getting the fair treatment they deserve".
Really?!
The FSA has warned insurers that they "will continue to supervise the sector in an intensive way".
The new proposals, which will now be consulted on, cover:
MVRs: Firms will be restricted in their ability to impose "market value reductions"
(MVRs) - the exit penalties you face when you cash in your policy early or move your money to a different company. Companies will not be able to arbitrarily impose penalties because they want to stop policyholders leaving, and will only be allowed to impose penalties to ensure policyholders receive a fair reflection of the value of their policy.
New business: The company will need to demonstrate that writing new business into the fund does not have an adverse effect on existing policyholders. This will tighten up the rules so firms will not be able to offer 'loss leaders' which erode the amount in the with-profits fund for existing policyholders.
Charges: Firms will not be allowed to use servicing companies to extract extra money in charges from with-profits policyholders by including a profit margin on top of the actual cost.
Excess surplus: Firms will be required to have a plan to distribute any excess surplus cash fairly to policyholders, particularly if a company suffers a big fall in the amount of new business it is doing.
With-profits Committees: Firms must provide a clear distinction between the recommendations of the with-profits committee and what action the firm intends to take in response, and will be required to notify the regulator when it overrules the advice of the with-profits committee.
All very nice, but too little too late for those hapless house owners ripped off by the endowment mortgage scandal of the 80's and 90's.
The FSA has finally admitted that with-profits policyholders "are not always getting the fair treatment they deserve".
Really?!
The FSA has warned insurers that they "will continue to supervise the sector in an intensive way".
The new proposals, which will now be consulted on, cover:
MVRs: Firms will be restricted in their ability to impose "market value reductions"
(MVRs) - the exit penalties you face when you cash in your policy early or move your money to a different company. Companies will not be able to arbitrarily impose penalties because they want to stop policyholders leaving, and will only be allowed to impose penalties to ensure policyholders receive a fair reflection of the value of their policy.
New business: The company will need to demonstrate that writing new business into the fund does not have an adverse effect on existing policyholders. This will tighten up the rules so firms will not be able to offer 'loss leaders' which erode the amount in the with-profits fund for existing policyholders.
Charges: Firms will not be allowed to use servicing companies to extract extra money in charges from with-profits policyholders by including a profit margin on top of the actual cost.
Excess surplus: Firms will be required to have a plan to distribute any excess surplus cash fairly to policyholders, particularly if a company suffers a big fall in the amount of new business it is doing.
With-profits Committees: Firms must provide a clear distinction between the recommendations of the with-profits committee and what action the firm intends to take in response, and will be required to notify the regulator when it overrules the advice of the with-profits committee.
All very nice, but too little too late for those hapless house owners ripped off by the endowment mortgage scandal of the 80's and 90's.
Thursday, November 19, 2009
Class Actions
Class Actions
This week's Queen's Speech has raised the possibility of hapless endowment policy holders being able to mount class actions against the life assurance industry.
The government proposes to give consumers the right, for the first time, to take "class action" suits through the courts in cases of large-scale wrongdoing such as endowment mis-selling or personal pensions.
This is something that I have been calling for over many years. Not only has the financial services industry mis-sold these flawed and badly designed products, but they have mismanagement them (despite awarding themselves very generous "management" fees and commissions).
The consumer will not only has grounds for suing wrt mis-selling, but also has grounds based on the fact that the products are not fit for purpose (ie they did not pay off the mortgage, which is what they were meant to do).
Why buy the product if it wasn't going to work?
Unfortunately, there is little chance of this becoming law this side of the election.
This week's Queen's Speech has raised the possibility of hapless endowment policy holders being able to mount class actions against the life assurance industry.
The government proposes to give consumers the right, for the first time, to take "class action" suits through the courts in cases of large-scale wrongdoing such as endowment mis-selling or personal pensions.
This is something that I have been calling for over many years. Not only has the financial services industry mis-sold these flawed and badly designed products, but they have mismanagement them (despite awarding themselves very generous "management" fees and commissions).
The consumer will not only has grounds for suing wrt mis-selling, but also has grounds based on the fact that the products are not fit for purpose (ie they did not pay off the mortgage, which is what they were meant to do).
Why buy the product if it wasn't going to work?
Unfortunately, there is little chance of this becoming law this side of the election.
Friday, August 21, 2009
Reality Dawns
Reality Dawns
As I have noted many times on this site, at some stage the hapless millions who were conned into buying useless, underperforming endowment mortgages will have to cover the shortfall when the policy matures.
The penny may finally be dropping, wrt paying off uncovered debt, as The Times reports that people are waking up to the problems of paying off interest only deals (an offshoot of endowments).
"Figures from the Financial Services Authority, which has regulated mortgages since 2004, show that 38 per cent of Britain's 11.1 million mortgage borrowers — or more than one in three — may have made inadequate provision to pay off their capital sum.
Many are in negative equity and the savings products taken out to cover the capital repayments have fallen short. That 38 per cent figure does not include those with endowments or buy-to-let investors who took out interest-only mortgages to keep the cost down."
These policies are beginning ot mature at the very time the property market/economy is struggling to pull itself out of the mire.
As I have noted many times on this site, at some stage the hapless millions who were conned into buying useless, underperforming endowment mortgages will have to cover the shortfall when the policy matures.
The penny may finally be dropping, wrt paying off uncovered debt, as The Times reports that people are waking up to the problems of paying off interest only deals (an offshoot of endowments).
"Figures from the Financial Services Authority, which has regulated mortgages since 2004, show that 38 per cent of Britain's 11.1 million mortgage borrowers — or more than one in three — may have made inadequate provision to pay off their capital sum.
Many are in negative equity and the savings products taken out to cover the capital repayments have fallen short. That 38 per cent figure does not include those with endowments or buy-to-let investors who took out interest-only mortgages to keep the cost down."
These policies are beginning ot mature at the very time the property market/economy is struggling to pull itself out of the mire.
Thursday, July 16, 2009
99% Shortfall
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.
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.
Thursday, March 05, 2009
Suckered In
Suckered In
As per The Daily Mirror:
"More than 300,000 homeowners due to clear their mortgage debts this year are facing shameful shortfalls.
And some five million more people will suffer a similar fate in the next few years as a result of monstrous mis-selling of with-profits endowment policies....
Millions of people were suckered into taking out these disastrous policies in the 80s...."
Re being "suckered in", I couldn't agree more!
As per The Daily Mirror:
"More than 300,000 homeowners due to clear their mortgage debts this year are facing shameful shortfalls.
And some five million more people will suffer a similar fate in the next few years as a result of monstrous mis-selling of with-profits endowment policies....
Millions of people were suckered into taking out these disastrous policies in the 80s...."
Re being "suckered in", I couldn't agree more!
Friday, February 27, 2009
FSA Shortchanges Policyholders
FSA Shortchanges Policyholders
The Financial Services Authority has shortchanged endowment policyholders who lodge a complaint for mis-selling against life assurance companies running closed funds.
New rules preventing life companies from using surpluses held in with-profits funds to meet compensation costs will only apply to policies sold after the rules come into force.
Under the FSA's original proposal, the rule change would have applied to all payments made after the regulations came into force, regardless of when the policies were sold or any mis-selling occurred.
The Financial Services Authority has shortchanged endowment policyholders who lodge a complaint for mis-selling against life assurance companies running closed funds.
New rules preventing life companies from using surpluses held in with-profits funds to meet compensation costs will only apply to policies sold after the rules come into force.
Under the FSA's original proposal, the rule change would have applied to all payments made after the regulations came into force, regardless of when the policies were sold or any mis-selling occurred.
Wednesday, February 25, 2009
Prudential Cuts Bonus
Prudential Cuts Bonus
Prudential has cut its annual bonuses by between 6% to 10% on its £65BN with-profits (such an ironic name) fund. Approximately 4.5 million policyholders are now facing cuts, some of which are up to 10%, in their payouts.
The Prudential says that it is acting in the best interests of the fund, and cushioning policyholders against potentially bigger blows.
Surely the purpose of the with profits fund was to smooth the returns in good and bad years, in order to avoid such massive swings?
This cut demonstrates that the concept of "with profits" smoothing has not been properly applied in past years.
Prudential has cut its annual bonuses by between 6% to 10% on its £65BN with-profits (such an ironic name) fund. Approximately 4.5 million policyholders are now facing cuts, some of which are up to 10%, in their payouts.
The Prudential says that it is acting in the best interests of the fund, and cushioning policyholders against potentially bigger blows.
Surely the purpose of the with profits fund was to smooth the returns in good and bad years, in order to avoid such massive swings?
This cut demonstrates that the concept of "with profits" smoothing has not been properly applied in past years.
Monday, January 19, 2009
Norwich Union Cuts Bonuses
Norwich Union Cuts Bonuses
The annual bonus season is upon us again and, unsurprisingly, cuts are in the offing.
Norwich Union has announced a cut in bonus payments on its "with profits" (such an ironic name!) policies. The 2.3 million people who hold a Norwich "with profits" policy suffered a cut of up to 16%.
This means that the majority of Norwich's endowment mortgage customers are likely to face a shortfall when their policy matures.
David Barral, Norwich Union Director, is quoted in the Guardian:
"Our with-profits funds have continued to prove their worth by delivering attractive long-term returns for investors while protecting them from the ups and downs of the stockmarket."
Could someone from the financial services industry care to explain to the millions of hapless "with profits" policy holders why "with profits" smoothing, in poor years, is never applied (as evidenced by the sharp cuts in bonuses); yet in good years it is applied?
Other companies will be announcing their cuts in due course, and it is certain that they will be as bad or worse than Norwich Union.
The annual bonus season is upon us again and, unsurprisingly, cuts are in the offing.
Norwich Union has announced a cut in bonus payments on its "with profits" (such an ironic name!) policies. The 2.3 million people who hold a Norwich "with profits" policy suffered a cut of up to 16%.
This means that the majority of Norwich's endowment mortgage customers are likely to face a shortfall when their policy matures.
David Barral, Norwich Union Director, is quoted in the Guardian:
"Our with-profits funds have continued to prove their worth by delivering attractive long-term returns for investors while protecting them from the ups and downs of the stockmarket."
Could someone from the financial services industry care to explain to the millions of hapless "with profits" policy holders why "with profits" smoothing, in poor years, is never applied (as evidenced by the sharp cuts in bonuses); yet in good years it is applied?
Other companies will be announcing their cuts in due course, and it is certain that they will be as bad or worse than Norwich Union.
Saturday, November 15, 2008
140 A Week
140 A Week
Caroline Mitchell, lead ombudsman for the Financial Ombudsman Service, told an audience at MBE London 2008 that the level of mortgage endowment complaints has fallen as a result of time barring.
However, complaints are still coming in at 140 a week.
Caroline Mitchell, lead ombudsman for the Financial Ombudsman Service, told an audience at MBE London 2008 that the level of mortgage endowment complaints has fallen as a result of time barring.
However, complaints are still coming in at 140 a week.
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