Bonuses Cut
More bad news for the hapless holders of underperforming, and useless, endowment policies.
Axa Equity & Law has announced that it will be halving the annual bonus payments on its with-profits policies from a pathetic 2%, to a derisory 1%.
That is less than inflation, and certainly less than you would get for leaving your money in a savings account.
Legal & General (L&G) has cut interim bonuses on some of its with-profits bonds from 3.5% to 2.75%.
Prudential is maintaining its annual bonus payouts on its Prudence Bond, at 3.25%.
The Actuarial Profession are reported to have said that, despite rising equity markets, bonus payouts "are continuing to fall and are set to do so for a number of years yet".
Monday, January 10, 2005
Sunday, January 09, 2005
Three Cheers for Liverpool Victoria
Three Cheers for Liverpool Victoria
Liverpool Victoria, the UK's largest friendly society, announced this week that all of its currently maturing mortgage endowment policies would receive a surplus on top of the mortgage amount covered.
In other words, those who hold endowment polices with Liverpool Victoria will receive a small profit over and above the mortgage.
Malcolm Berryman, Liverpool Victoria's group chief executive, said:
"The strong performance of our with-profits fund has ensured a surplus for all of our mortgage endowment policies that have matured or are currently maturing..In addition, our unconditional guarantee gives total peace of mind to our members for the future...."
Liverpool Victoria confirmed that none of its 6,000 mortgage endowment policyholders will suffer a shortfall, whatever happens to future investment returns.
It has made a financial provision to cover this guarantee, this will not have any adverse impact on future financial performance.
Now let us compare this excellent piece of news, with the dismal announcements made by the life assurance industry recently.
After all, they have all faced the same declining stock market!
The answer lies in the manner in which the companies manage their funds. Liverpool Victoria were more cautious when it came to paying out vast annual bonuses, in years of high returns.
They understood the concept of "with profits", namely that the profits made in one year should be used to smooth returns in the years of poor performance.
Unfortunately, it seems that many other "big names" in the "profession" chose to go for big bonuses in order to attract customers.
Needless to say, famine follows feast; when the stock markets started to fall, and with it investment returns, these companies that had paid out super inflated bonuses had nothing left in the cupboard to smooth things over with in the lean years.
I would argue that, in addition to persuing these companies for "mis-selling" polices, people, the FSA and the Treasury Select Committee should be going after them for mismanaging the funds.
After all if one company can produce a surplus whilst operating in the exactly the same market, why couldn't the others?
Liverpool Victoria, the UK's largest friendly society, announced this week that all of its currently maturing mortgage endowment policies would receive a surplus on top of the mortgage amount covered.
In other words, those who hold endowment polices with Liverpool Victoria will receive a small profit over and above the mortgage.
Malcolm Berryman, Liverpool Victoria's group chief executive, said:
"The strong performance of our with-profits fund has ensured a surplus for all of our mortgage endowment policies that have matured or are currently maturing..In addition, our unconditional guarantee gives total peace of mind to our members for the future...."
Liverpool Victoria confirmed that none of its 6,000 mortgage endowment policyholders will suffer a shortfall, whatever happens to future investment returns.
It has made a financial provision to cover this guarantee, this will not have any adverse impact on future financial performance.
Now let us compare this excellent piece of news, with the dismal announcements made by the life assurance industry recently.
- AXA has announced that it will be reducing their payouts
- Standard Life will reduce its payouts to its 2.4M policy holders
- The Actuarial Profession, the body which represents those who run with-profits funds, has warned that the majority of customers will face falls in value of their policies for several years to come
After all, they have all faced the same declining stock market!
The answer lies in the manner in which the companies manage their funds. Liverpool Victoria were more cautious when it came to paying out vast annual bonuses, in years of high returns.
They understood the concept of "with profits", namely that the profits made in one year should be used to smooth returns in the years of poor performance.
Unfortunately, it seems that many other "big names" in the "profession" chose to go for big bonuses in order to attract customers.
Needless to say, famine follows feast; when the stock markets started to fall, and with it investment returns, these companies that had paid out super inflated bonuses had nothing left in the cupboard to smooth things over with in the lean years.
I would argue that, in addition to persuing these companies for "mis-selling" polices, people, the FSA and the Treasury Select Committee should be going after them for mismanaging the funds.
After all if one company can produce a surplus whilst operating in the exactly the same market, why couldn't the others?
Procter Jumps Ship
Procter Jumps Ship
Andrew Procter, head of enforcement at the Financial Services Authority (FSA), is leaving to join Deutsche Bank; as head of compliance for Britain and Western Europe.
Procter was involved in the investigation into endowment mis-selling at Legal & General (L&G), which is currently appealing the £1.1m fine at the financial services and markets tribunal.
The result of their appeal is expected to be announced this week; and it was assumed, by some, that if L&G won then Procter would have to resign.
Andrew Procter, head of enforcement at the Financial Services Authority (FSA), is leaving to join Deutsche Bank; as head of compliance for Britain and Western Europe.
Procter was involved in the investigation into endowment mis-selling at Legal & General (L&G), which is currently appealing the £1.1m fine at the financial services and markets tribunal.
The result of their appeal is expected to be announced this week; and it was assumed, by some, that if L&G won then Procter would have to resign.
Wednesday, January 05, 2005
A Straw in The Wind
A Straw in The Wind
The Financial Services authority (FSA) has decided that it is now time to "get tough" with the life assurance industry, in respect of the underperforming and useless endowment policies that some 8 million people hold in the UK.
The FSA have written to the chief executives of all companies that sell endowment policies; the letter warns them that, in the opinion of the FSA, they (the life assurance companies) are dismissing complaints from customers without proper investigation.
To date, 500,000 people have complained to insurers and banks; and have received compensation for endowment mortgage mis-selling.
The FSA notes that the Financial Ombudsman Service (FOS) is upholding a large proportion of complaints, that were originally dismissed by the companies that sold the policies; this gives rise to the conclusion that the life assurance companies are not handling the complaints properly.
The FOS now employs 1000 people to handle endowment complaints.
Clive Briault, managing director of retail markets at the FSA, says:
"firms may not be handling complaints properly...Firms should not manage their own caseloads by allowing an excessive number of complaints to flow through to the FOS...".
The FSA has also identified "inconsistencies" in the decisions of some life assurance companies, relating to certain types of complaint.
To date the FSA has fined two companies, for their failure to handle complaints about endowment mortgages properly.
-Allied Dunbar Assurance was fined £725K for serious flaws in March 2004
-Friends Provident was fined £675K for failures in its procedures.
The FSA states that it wants firms to review their policies and procedures for the handling of complaints, and confirm that they are appropriate or take any necessary action.
The FSA will continue to monitor progress and outcomes to assure itself and the public that complaints are being handled fairly, and to act in any cases where it finds weaknesses that put consumers' interests at risk.
There is reportedly a straw in the wind, albeit a rather small one, that indicates that the mood at FSA headquarters is shifting in favour of the hapless endowment policy holder. Namely, that the majority of policies were not mis-bought but mis-sold.
Which? goes one better.
Which? wants the FSA to order a wholesale re-investigation of all rejected complaints, to ensure that people have been dealt with fairly.
Louise Hanson, head of campaigns at Which?, said:
"The FSA must continue to take these bad apples to task by immediately naming and shaming them, and then implementing significant fines where rules have been broken.."
This site fully endorses this suggestion.
The Financial Services authority (FSA) has decided that it is now time to "get tough" with the life assurance industry, in respect of the underperforming and useless endowment policies that some 8 million people hold in the UK.
The FSA have written to the chief executives of all companies that sell endowment policies; the letter warns them that, in the opinion of the FSA, they (the life assurance companies) are dismissing complaints from customers without proper investigation.
To date, 500,000 people have complained to insurers and banks; and have received compensation for endowment mortgage mis-selling.
The FSA notes that the Financial Ombudsman Service (FOS) is upholding a large proportion of complaints, that were originally dismissed by the companies that sold the policies; this gives rise to the conclusion that the life assurance companies are not handling the complaints properly.
The FOS now employs 1000 people to handle endowment complaints.
Clive Briault, managing director of retail markets at the FSA, says:
"firms may not be handling complaints properly...Firms should not manage their own caseloads by allowing an excessive number of complaints to flow through to the FOS...".
The FSA has also identified "inconsistencies" in the decisions of some life assurance companies, relating to certain types of complaint.
To date the FSA has fined two companies, for their failure to handle complaints about endowment mortgages properly.
-Allied Dunbar Assurance was fined £725K for serious flaws in March 2004
-Friends Provident was fined £675K for failures in its procedures.
The FSA states that it wants firms to review their policies and procedures for the handling of complaints, and confirm that they are appropriate or take any necessary action.
The FSA will continue to monitor progress and outcomes to assure itself and the public that complaints are being handled fairly, and to act in any cases where it finds weaknesses that put consumers' interests at risk.
There is reportedly a straw in the wind, albeit a rather small one, that indicates that the mood at FSA headquarters is shifting in favour of the hapless endowment policy holder. Namely, that the majority of policies were not mis-bought but mis-sold.
Which? goes one better.
Which? wants the FSA to order a wholesale re-investigation of all rejected complaints, to ensure that people have been dealt with fairly.
Louise Hanson, head of campaigns at Which?, said:
"The FSA must continue to take these bad apples to task by immediately naming and shaming them, and then implementing significant fines where rules have been broken.."
This site fully endorses this suggestion.
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.
Monday, December 20, 2004
Trouble Ahead
It is reported that the Financial Ombudsman Service (FOS) has warned that it won't be unable to cope with the mortgage endowment complaints, next year; as there is expected to be steep rise in these complaints.
The rise in endowment complaints is expected, because the large life assurance companies will be sending out letters in the New Year to their policyholders; these will warn them about the 3 year time-bar rule.
Policyholders have 3 years from receipt of the first warning letter to complain.
The FOS is now getting fed up with endowment providers, who are disregarding complaint handling guidelines.
"..Some firms are systematically rejecting swathes of complaints with little or no investigation..."
It is reported that Halifax and Abbey National are among the names passed on to the FSA, by the FOS, in respect of shortcomings on complaint handling.
The FOS wants steps taken to force providers to settle cases themselves.
It is reported that the Financial Ombudsman Service (FOS) has warned that it won't be unable to cope with the mortgage endowment complaints, next year; as there is expected to be steep rise in these complaints.
The rise in endowment complaints is expected, because the large life assurance companies will be sending out letters in the New Year to their policyholders; these will warn them about the 3 year time-bar rule.
Policyholders have 3 years from receipt of the first warning letter to complain.
The FOS is now getting fed up with endowment providers, who are disregarding complaint handling guidelines.
"..Some firms are systematically rejecting swathes of complaints with little or no investigation..."
It is reported that Halifax and Abbey National are among the names passed on to the FSA, by the FOS, in respect of shortcomings on complaint handling.
The FOS wants steps taken to force providers to settle cases themselves.
Wednesday, December 15, 2004
The Costs Begin to Mount
The costs of compensating people for being mis-sold underperforming, and useless, endowment polices is beginning to bite into life assurance companies profits.
Lloyds TSB yesterday announced that it has had to set aside a further £110M to compensate customers, who were mis-sold endowment mortgages.
This brings their total provision for mis-selling endowments to £360M.
The costs of compensating people for being mis-sold underperforming, and useless, endowment polices is beginning to bite into life assurance companies profits.
Lloyds TSB yesterday announced that it has had to set aside a further £110M to compensate customers, who were mis-sold endowment mortgages.
This brings their total provision for mis-selling endowments to £360M.
Tuesday, December 14, 2004
Endowment Claims Cost HBOS £40M
HBOS bank has earmarked approximately £40M, in compensation for customers who may have been mis-sold underperforming performing endowment mortgages.
HBOS has reportedly admitted to an increase in the number of endowment cases being compensated, and said the precise figure will emerge in an exceptional provision in the 2004 results.
HBOS bank has earmarked approximately £40M, in compensation for customers who may have been mis-sold underperforming performing endowment mortgages.
HBOS has reportedly admitted to an increase in the number of endowment cases being compensated, and said the precise figure will emerge in an exceptional provision in the 2004 results.
Wednesday, December 08, 2004
A Slight Untruth
My dear friends at my life assurance company wrote to me today, in connection with my ongoing enquiries into how much commission they are charging on my two endowment policies.
Here is an extract of the letter, signed by their Customer Service Agent:
"Thank you for your telephone call on 30 November 2004. I apologise for the delay in my reply.
Unfortunately, due to systems limitations I am unable to advise you of the commission charges that have been paid on your policy...
I am sorry I can be of no further assistance..."
I would make a simple observation here.
The company is one of Britain's largest, and best known, life assurance company. They handle billions of pounds of investments, and have very sophisticated management information systems monitoring returns, payments, income etc.
Do they seriously expect me to believe that they do not keep records of commission payments?
My dear friends at my life assurance company wrote to me today, in connection with my ongoing enquiries into how much commission they are charging on my two endowment policies.
Here is an extract of the letter, signed by their Customer Service Agent:
"Thank you for your telephone call on 30 November 2004. I apologise for the delay in my reply.
Unfortunately, due to systems limitations I am unable to advise you of the commission charges that have been paid on your policy...
I am sorry I can be of no further assistance..."
I would make a simple observation here.
The company is one of Britain's largest, and best known, life assurance company. They handle billions of pounds of investments, and have very sophisticated management information systems monitoring returns, payments, income etc.
Do they seriously expect me to believe that they do not keep records of commission payments?
Friday, December 03, 2004
Formal Complaint
I have made a formal complaint to the Financial Ombudsman Service, about the obstructive and unhelpful attitude of my life assurance company; in respect of my enquiry about commission payments made on my endowment policies.
I have also copied all correspondence on this matter to the Treasury Select Committee.
I have made a formal complaint to the Financial Ombudsman Service, about the obstructive and unhelpful attitude of my life assurance company; in respect of my enquiry about commission payments made on my endowment policies.
I have also copied all correspondence on this matter to the Treasury Select Committee.
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