Compensation Shortfall
The Financial Services Compensation Scheme (FSCS) has said that its budget of 7000 endowment claims for 2005 is massively below reality, the actual level in fact is more likely to be 22000.
This means that it will face a shortfall in 2006.
The compensation scheme is funded through contributions from financial services companies, and is available to those who have endowment policies sold to them by IFA's that have subsequently gone bust.
This is the second year in succession that the scheme has underestimated the number of claims. In 2004 it had to ask the investment industry for an extra £15M, to cover compensation above the original budget of £33M.
It seems that not all the "collapses" of IFA's are as clear cut, as one might expect in an industry that is meant to domonstrate probity and integrity.
Berry Birch & Noble Financial Services ceased trading last year, and its assets were transferred to the almost identically named Berry Birch & Noble Financial Planning.
The firm's liabilities, including any compensation due to investors mis-sold products such as high risk income bonds, have been left with the defunct firm. This means that the FSCS have to pick up the "tab".
Loretta Minghella, FSCS chief executive, said:
"New endowment claims have been received at unprecedented levels, way beyond our expectations. As ever the challenge for FSCS is to strike the right balance between providing an efficient and timely service to consumers with our responsibility to the industry to keep costs under control."
I don't know why they are so surprised at the level of claims, these endowment products simply do not work.
The best solution would be for the life assurance industry to underwrite these worthless, useless, products.
Wednesday, November 16, 2005
Monday, November 14, 2005
The Price of Justice
The Price of Justice
It is reported that Paul Flynn, a Labour MP, has agreed to pay approximately £36K by way of settlement of a libel action brought against him by Endowment Justice.
Endowment Justice are a complaints handling firm, that specialise in endowment mortgages.
Mr Flynn's solicitor said that the MP was retracting allegations he had made against Endowment Justice.
Endowment Justice launched legal proceedings against Mr Flynn this year, after he criticised the complaints handling firms that work for endowment mis-selling victims.
Although Endowment Justice had held talks in the past with Mr Flynn over its concerns about bad practices at several complaints handling firms, Flynn then went on to name Endowment Justice in accusations he made about the whole sector.
It is reported that Paul Flynn, a Labour MP, has agreed to pay approximately £36K by way of settlement of a libel action brought against him by Endowment Justice.
Endowment Justice are a complaints handling firm, that specialise in endowment mortgages.
Mr Flynn's solicitor said that the MP was retracting allegations he had made against Endowment Justice.
Endowment Justice launched legal proceedings against Mr Flynn this year, after he criticised the complaints handling firms that work for endowment mis-selling victims.
Although Endowment Justice had held talks in the past with Mr Flynn over its concerns about bad practices at several complaints handling firms, Flynn then went on to name Endowment Justice in accusations he made about the whole sector.
Monday, November 07, 2005
98% To Experience Endowment Shortfall
98% To Experience Endowment Shortfall
The Times reports that Ned Cazalet, of Cazalet Consulting the independent analyst, predicts that about 98% of the 2.7M households with endowment mortgages will suffer a shortfall.
He believes that many companies are still understating the size of the problem, because they are basing projections on an "unrealistic" 6% growth rate.
He notes that the life assurance companies "make a thing of the fact that many policies maturing today are on target, but these policies are only a handful of the total..".
98%?
That's a lot of very unhappy people.
Surely that's a large enough number of people, to make it worthwhile to get together in a class action against the life assurance companies?
The Times reports that Ned Cazalet, of Cazalet Consulting the independent analyst, predicts that about 98% of the 2.7M households with endowment mortgages will suffer a shortfall.
He believes that many companies are still understating the size of the problem, because they are basing projections on an "unrealistic" 6% growth rate.
He notes that the life assurance companies "make a thing of the fact that many policies maturing today are on target, but these policies are only a handful of the total..".
98%?
That's a lot of very unhappy people.
Surely that's a large enough number of people, to make it worthwhile to get together in a class action against the life assurance companies?
Tuesday, November 01, 2005
Standard Life Demutualisation
Standard Life Demutualisation
Those of you with endowment policies in Standard Life, may find this article in This Is Money to be of interest.
It explains the effects that the proposed demutualisation of Standard Life may have on endowment policies.
Those of you with endowment policies in Standard Life, may find this article in This Is Money to be of interest.
It explains the effects that the proposed demutualisation of Standard Life may have on endowment policies.
Monday, October 24, 2005
Ever Wondered?
Ever Wondered?
Those of you who are sitting on an unhealthy endowment shortfall, there are estimated to be around 8 million of you, may be wondering why more has not been done by the Financial services Authority (FSA) to bring those who manage these useless polices (ie the life assurance companies) to book.
Well the answer can be found in a speech made, a month ago in Washington, by Sir Howard Davies.
Sir Howard Davies is the director of the London School of Economics, and the former chairman of the FSA.
When he was head of the FSA, Davies decided against playing hard ball with the life assurance industry in respect of their mis-sold and mismanaged endowment mortgages.
In his speech he noted that a more aggressive approach "could perhaps be justified in consumer protection terms". However, it "could well have generated a systemic crisis", because "the amount of compensation politically payable would have threatened the viability of many insurance companies".
In other words he was afraid of the consequences of doing the right thing, because it would hurt the life assurance companies.
A cynic might argue that he was protecting the powerful life assurance lobby, because he was more afraid of them than he was of the hapless consumers who bought these underperforming and useless endowment policies.
Regrettably, it seems, the "old boys network" is still alive and flourishing in Britain.
I assume that Sir Howard, and the life assurance industry did not buy any of these products themselves?
Those of you who are sitting on an unhealthy endowment shortfall, there are estimated to be around 8 million of you, may be wondering why more has not been done by the Financial services Authority (FSA) to bring those who manage these useless polices (ie the life assurance companies) to book.
Well the answer can be found in a speech made, a month ago in Washington, by Sir Howard Davies.
Sir Howard Davies is the director of the London School of Economics, and the former chairman of the FSA.
When he was head of the FSA, Davies decided against playing hard ball with the life assurance industry in respect of their mis-sold and mismanaged endowment mortgages.
In his speech he noted that a more aggressive approach "could perhaps be justified in consumer protection terms". However, it "could well have generated a systemic crisis", because "the amount of compensation politically payable would have threatened the viability of many insurance companies".
In other words he was afraid of the consequences of doing the right thing, because it would hurt the life assurance companies.
A cynic might argue that he was protecting the powerful life assurance lobby, because he was more afraid of them than he was of the hapless consumers who bought these underperforming and useless endowment policies.
Regrettably, it seems, the "old boys network" is still alive and flourishing in Britain.
I assume that Sir Howard, and the life assurance industry did not buy any of these products themselves?
Friday, October 21, 2005
Scottish Endowment Diary
Scottish Endowment Diary
We are not alone, Gail McEwan has just launched the Scottish Endowment Diary.
She is campaigning for fresh legislation which will give consumers who were mis-sold endowment policies by solicitors in 1990's, the same rights of redress as customers of financial services firms.
Quote from her site:
"This is a brand new website and is dedicated to all of you who have been 'ripped off' by Scottish Solicitors. (A Legal Profession who have abdicated all responsibility for the devastating consequences for thousands of Scottish people who have been left in financial distress because of shortfalls in their policies)."
The site can be accessed via this link Scottish Endowment Diary.
We are not alone, Gail McEwan has just launched the Scottish Endowment Diary.
She is campaigning for fresh legislation which will give consumers who were mis-sold endowment policies by solicitors in 1990's, the same rights of redress as customers of financial services firms.
Quote from her site:
"This is a brand new website and is dedicated to all of you who have been 'ripped off' by Scottish Solicitors. (A Legal Profession who have abdicated all responsibility for the devastating consequences for thousands of Scottish people who have been left in financial distress because of shortfalls in their policies)."
The site can be accessed via this link Scottish Endowment Diary.
Thursday, October 13, 2005
A Day
A Day
A Day, when a new set of pension rules will be introduced, may well have implications for those expecting a shortfall in their endowment policy.
The A Day regulations will replace much of the existing pension legislation, which has been built up over previous decades.
The BBC website has a summary about A Day, and is worthwhile visiting.
I must emphasise that any decisions regarding money should only be made after taking legal and financial advice from suitably qualified, competent and independent legal/financial experts.
A Day, when a new set of pension rules will be introduced, may well have implications for those expecting a shortfall in their endowment policy.
The A Day regulations will replace much of the existing pension legislation, which has been built up over previous decades.
The BBC website has a summary about A Day, and is worthwhile visiting.
I must emphasise that any decisions regarding money should only be made after taking legal and financial advice from suitably qualified, competent and independent legal/financial experts.
Wednesday, October 12, 2005
Standard Life Says It Is On Course
Standard Life Says It Is On Course
Following on from the previous article about the possibility of Standard Life delaying its planned flotation, because of unresolved issues with the FSA, Standard Life has stated that its plans are on track.
The FSA was reported to have been scrutinising Standard Life's liabilities for its mortgage endowment promise and its endowment complaints, and would need to be satisfied "by the end of this month" if the flotation timetable was to be met.
Standard Life have stated:
"The FSA and Standard Life are in continual dialogue, and that will take place up until the company's IPO (initial public offering.
Any changes that the company has put in place over the last year, the FSA must continuously be satisfied that it can meet its obligations."
They then went on to note that the endowment complaint issue was "a red herring".
They hold a provision for meeting their endowment promise of £393m.
The mortgage endowment promise was introduced in September 2000.
It promised that for the 770,000 customers who faced a shortfall at that time, the deficit would be made up by the insurer, providing underlying assets grew by at least 6% a year after tax.
Those whose policies went into the "amber" or "red" zone after September 2000 were never covered, but the 65,000 whose policies mature before the end of this year will still be topped up in full.
However, Standard Life reneged on its promise; top-ups will still be applied to the remainder, but limited to between 40% and 60% of what was promised.
Following on from the previous article about the possibility of Standard Life delaying its planned flotation, because of unresolved issues with the FSA, Standard Life has stated that its plans are on track.
The FSA was reported to have been scrutinising Standard Life's liabilities for its mortgage endowment promise and its endowment complaints, and would need to be satisfied "by the end of this month" if the flotation timetable was to be met.
Standard Life have stated:
"The FSA and Standard Life are in continual dialogue, and that will take place up until the company's IPO (initial public offering.
Any changes that the company has put in place over the last year, the FSA must continuously be satisfied that it can meet its obligations."
They then went on to note that the endowment complaint issue was "a red herring".
They hold a provision for meeting their endowment promise of £393m.
The mortgage endowment promise was introduced in September 2000.
It promised that for the 770,000 customers who faced a shortfall at that time, the deficit would be made up by the insurer, providing underlying assets grew by at least 6% a year after tax.
Those whose policies went into the "amber" or "red" zone after September 2000 were never covered, but the 65,000 whose policies mature before the end of this year will still be topped up in full.
However, Standard Life reneged on its promise; top-ups will still be applied to the remainder, but limited to between 40% and 60% of what was promised.
Monday, October 10, 2005
Standard Life Float Delayed
Standard Life Float Delayed
It is reported that Standard Life's flotation might be delayed until 2007, due to outstanding issues with the Financial Services Authority (FSA) over endowment mortgages.
The float was originally planned to happen in 2006. However, the FSA is reported to be seeking assurances from the company over a number of issues; including allocation of capital and how much new money they want to raise.
Specifically the FSA want clarification over assurances that Standard Life gave last year, when it announced that it was unable to fulfill its mortgage promise to 600,000 holders of endowment policies.
Standard Life also set a deadline of May 2006 for considering mis-selling complaints over endowment policies, this hits 350,000 endowment policy holders.
Standard Life has set aside £393m to pay top-ups to policyholders facing shortfalls.
However, customers whose endowment policies mature after the end of this year will receive only 40%-60% of the top-ups.
You will recall that the FSA and Standard Life had something of a run in earlier last year; the dispute, over the measurement of its solvency, forced Standard Life to change its chief executive and reverse its long-standing opposition to demutualisation and sell £7.5bn of equities.
What goes around comes around!
It is reported that Standard Life's flotation might be delayed until 2007, due to outstanding issues with the Financial Services Authority (FSA) over endowment mortgages.
The float was originally planned to happen in 2006. However, the FSA is reported to be seeking assurances from the company over a number of issues; including allocation of capital and how much new money they want to raise.
Specifically the FSA want clarification over assurances that Standard Life gave last year, when it announced that it was unable to fulfill its mortgage promise to 600,000 holders of endowment policies.
Standard Life also set a deadline of May 2006 for considering mis-selling complaints over endowment policies, this hits 350,000 endowment policy holders.
Standard Life has set aside £393m to pay top-ups to policyholders facing shortfalls.
However, customers whose endowment policies mature after the end of this year will receive only 40%-60% of the top-ups.
You will recall that the FSA and Standard Life had something of a run in earlier last year; the dispute, over the measurement of its solvency, forced Standard Life to change its chief executive and reverse its long-standing opposition to demutualisation and sell £7.5bn of equities.
What goes around comes around!
Tuesday, October 04, 2005
MP Acts
MP Acts
Sandra Osborne, a Scottish MP, has promised to act and to try to help thousands of house owners who have been mis-sold mortgage endowment policies.
Sandra Osborne helped bring in new rules governing the sale of endowment policies by banks and building societies.
She said that she intended to lobby the government to help the thousands of people who have been mis-sold the same policies by their solicitor.
She was prompted to act after listening to BBC Radio Scotland's series, The Investigation.
The show explained how many people, who were mis-sold these policies in the 1980's and 90's by banks, building societies and other financial institutions, have successfully claimed compensation for performance shortfalls.
However, it seems that Scots who were sold identical policies by their solicitor when buying their homes have virtually no hope of being compensated for their losses.
The programme featured Gail McEwan, who is running a campaign to win compensation for people in Scotland.
If you think you have been mis-sold an endowment policy by your solicitor and want to join Gail McEwan's campaign to get parliament to act, you can contact her at PO Box 19582, Johnstone.
I wish her every success.
Sandra Osborne, a Scottish MP, has promised to act and to try to help thousands of house owners who have been mis-sold mortgage endowment policies.
Sandra Osborne helped bring in new rules governing the sale of endowment policies by banks and building societies.
She said that she intended to lobby the government to help the thousands of people who have been mis-sold the same policies by their solicitor.
She was prompted to act after listening to BBC Radio Scotland's series, The Investigation.
The show explained how many people, who were mis-sold these policies in the 1980's and 90's by banks, building societies and other financial institutions, have successfully claimed compensation for performance shortfalls.
However, it seems that Scots who were sold identical policies by their solicitor when buying their homes have virtually no hope of being compensated for their losses.
The programme featured Gail McEwan, who is running a campaign to win compensation for people in Scotland.
If you think you have been mis-sold an endowment policy by your solicitor and want to join Gail McEwan's campaign to get parliament to act, you can contact her at PO Box 19582, Johnstone.
I wish her every success.
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