The Endowment Rip Off
Farininvestment.co.uk has published research that shows 90% of people who own a useless and underperforming endowment product believe that they were victims of mis-selling.
The research also showed that 86% of endowment policyholders were expecting their policy to suffer a shortfall.
Of those who felt their had bought their policy after receiving poor advice, 49% said they had been given a guarantee that the policy would cover the mortgage costs, while 27% say the risks involved were not made clear. A further 6% felt fees and charges had not been properly explained.
Something that our financial services industry can be proud of?
Saturday, August 16, 2008
Thursday, July 31, 2008
The £1BN Payoff
The Times reports that long suffering Norwich Union endowment policyholders have been offered £1BN of its with-profits fund.
Aviva, the owner of Norwich Union, will offer about 700,000 policyholders between £400 and £1,000 in exchange for foregoing their right to future bonus payments. A further 220,000 will receive up to about £3,500 and a handful of long-term investors will collect several thousand pounds more.
Clare Spottiswoode, the policyholder advocate, is well pleased and describes the result as a "triple-whammy winner" for the policyholders.
Aviva, the owner of Norwich Union, will offer about 700,000 policyholders between £400 and £1,000 in exchange for foregoing their right to future bonus payments. A further 220,000 will receive up to about £3,500 and a handful of long-term investors will collect several thousand pounds more.
Clare Spottiswoode, the policyholder advocate, is well pleased and describes the result as a "triple-whammy winner" for the policyholders.
Tuesday, July 29, 2008
Public Censure
Public Censure
The Financial Services Authority (FSA) has publicly censured Mandrake Associates Limited (MAL) for serious failings in the way it handled mortgage endowment complaints.
The FSA has also prohibited William John Pirie, the firm's sole director, from carrying out any customer functions in regulated financial services due to his mishandling of endowment mortgage complaints received by MAL.
The FSA claimed that as a result of MAL's failings, there was an enhanced risk that endowment mis-selling complaints were either wrongly rejected or delayed.
MAL was found to have failed to ensure its complaints handling procedures were operating effectively, failed to provide adequate resources for the handling of mortgage endowment complaints and failed to ensure that complaint handling personnel were trained to carry out fair investigations.
In addition it failed to finalise the complaints that were dealt with, within a reasonable time and failed to provide complainants with updates about the progress of investigation in a timely fashion, while it also failed to co-operate fully and promptly with the directions of the Financial Ombudsman Service.
Margaret Cole, director of enforcement at the FSA, said:
"Firms must have in place and operate an effective complaints handling system as a key part of treating customers fairly. MAL's endowment complaints handling failings were systemic, lasting for four years and meant consumers who had been mis-sold endowments were at risk of not receiving compensation at all or only after long delay.
Firms who fail their customers in this way will face enforcement action. MAL would have faced a fine of £400,000 if it had not been for its current financial position."
The Financial Services Authority (FSA) has publicly censured Mandrake Associates Limited (MAL) for serious failings in the way it handled mortgage endowment complaints.
The FSA has also prohibited William John Pirie, the firm's sole director, from carrying out any customer functions in regulated financial services due to his mishandling of endowment mortgage complaints received by MAL.
The FSA claimed that as a result of MAL's failings, there was an enhanced risk that endowment mis-selling complaints were either wrongly rejected or delayed.
MAL was found to have failed to ensure its complaints handling procedures were operating effectively, failed to provide adequate resources for the handling of mortgage endowment complaints and failed to ensure that complaint handling personnel were trained to carry out fair investigations.
In addition it failed to finalise the complaints that were dealt with, within a reasonable time and failed to provide complainants with updates about the progress of investigation in a timely fashion, while it also failed to co-operate fully and promptly with the directions of the Financial Ombudsman Service.
Margaret Cole, director of enforcement at the FSA, said:
"Firms must have in place and operate an effective complaints handling system as a key part of treating customers fairly. MAL's endowment complaints handling failings were systemic, lasting for four years and meant consumers who had been mis-sold endowments were at risk of not receiving compensation at all or only after long delay.
Firms who fail their customers in this way will face enforcement action. MAL would have faced a fine of £400,000 if it had not been for its current financial position."
Monday, July 28, 2008
The £1BN Payout
The £1BN Payout
The Financial Services Compensation Scheme (FSCS) reported that over £1BN of compensation has been paid out to consumers who lost money due to the collapse of financial services firms over the past seven years.
The FSCS was set up in 2001, and has paid out £1.04BN since inception. However, out of the 16,490 new claims, the majority (7,410) still relate to mortgage endowments. The hapless claimants having bought the useless product from a firm that had collapsed before they received their compensation for mis-selling.
The average payout was £1,800 each.
The Financial Services Compensation Scheme (FSCS) reported that over £1BN of compensation has been paid out to consumers who lost money due to the collapse of financial services firms over the past seven years.
The FSCS was set up in 2001, and has paid out £1.04BN since inception. However, out of the 16,490 new claims, the majority (7,410) still relate to mortgage endowments. The hapless claimants having bought the useless product from a firm that had collapsed before they received their compensation for mis-selling.
The average payout was £1,800 each.
Monday, July 21, 2008
Friends Provident Cuts Bonuses
Friends Provident Cuts Bonuses
Those long suffering endowment policy holders who have polices managed by Friends Provident will have been disappointed to learn that it will be slashing the final bonuses it pays to long-term savers.
Friends Provident state that the value of its with-profits fund fell by more than 7% during the first half of the year.
Whilst annual bonuses are being maintained, the final bonuses are being cut. Those in the main with-profits fund are being more than halved.
A policyholder with a 15 year unitised pension plan in the main fund will receive a regular bonus of 4%, but their final bonus will be cut from 18.7% if the policy had matured in January to just 2.1% now.
Those with a 25 year policy will be paid a final bonus of 17.5%, a massive reduction from the original 40% in January.
The ongoing credit crisis and recent falls in the stock market are being blamed. All very well, but what about the previous years when the stock market was booming?
A lousy result for those who have spent years investing in these policies.
Those long suffering endowment policy holders who have polices managed by Friends Provident will have been disappointed to learn that it will be slashing the final bonuses it pays to long-term savers.
Friends Provident state that the value of its with-profits fund fell by more than 7% during the first half of the year.
Whilst annual bonuses are being maintained, the final bonuses are being cut. Those in the main with-profits fund are being more than halved.
A policyholder with a 15 year unitised pension plan in the main fund will receive a regular bonus of 4%, but their final bonus will be cut from 18.7% if the policy had matured in January to just 2.1% now.
Those with a 25 year policy will be paid a final bonus of 17.5%, a massive reduction from the original 40% in January.
The ongoing credit crisis and recent falls in the stock market are being blamed. All very well, but what about the previous years when the stock market was booming?
A lousy result for those who have spent years investing in these policies.
Monday, July 14, 2008
Equitable Life
Equitable Life
The long suffering, and shockingly mistreated, investors in Equitable Life may be slightly cheered by a report in today's Telegraph that says:
"Prudential, Legal & General and Swiss Re are among a pack of insurance giants circling Equitable Life, Britain's oldest mutual insurer.
Equitable has drawn up a shortlist of bidders for the remnants of the former insurance leader, which at its peak was worth £26bn and had 1.5m policyholders.
News of prospective bids for the business comes ahead of this week's publication of a damning report by Ann Abraham, the Parliamentary Ombudsman, who will criticise the Government for its failure to regulate the society properly in the lead-up to its near collapse."
The purchase, if it comes, will take some time. Therefore, whilst the investors are waiting for the outcome of that, they should mount a class action against the government for its maladministration of one of the biggest scandals to shake Britain's financial services industry.
The long suffering, and shockingly mistreated, investors in Equitable Life may be slightly cheered by a report in today's Telegraph that says:
"Prudential, Legal & General and Swiss Re are among a pack of insurance giants circling Equitable Life, Britain's oldest mutual insurer.
Equitable has drawn up a shortlist of bidders for the remnants of the former insurance leader, which at its peak was worth £26bn and had 1.5m policyholders.
News of prospective bids for the business comes ahead of this week's publication of a damning report by Ann Abraham, the Parliamentary Ombudsman, who will criticise the Government for its failure to regulate the society properly in the lead-up to its near collapse."
The purchase, if it comes, will take some time. Therefore, whilst the investors are waiting for the outcome of that, they should mount a class action against the government for its maladministration of one of the biggest scandals to shake Britain's financial services industry.
Monday, July 07, 2008
Without Profits
Without Profits
Those hapless with profits endowment policy holders have good reason to make a claim against the life assurance companies for false description of their products. The recent poor results from these companies show that these policies should be refereed to as "without profits".
Money Management magazine has identified a number of "stellar" under performers:
Those hapless with profits endowment policy holders have good reason to make a claim against the life assurance companies for false description of their products. The recent poor results from these companies show that these policies should be refereed to as "without profits".
Money Management magazine has identified a number of "stellar" under performers:
- Monthly premiums of £50 paid into a London Life with profits endowment for the past 10 years (ie £6000) would have a generated a payout of £5,544. Why not just set fire to your money instead?
Other 10 year policies paying out less than was paid in include Equitable Life, Pearl and Royal Life. - In 1998, the average 25 year endowment policy paid £105,540 on a £50 per month premium. In 2003, the average payout was £65,776. Now the average 25 year policy pays out £45,330.
- Thirty five insurers are paying lower payouts on 25 year policies compared with this time last year.
Monday, June 30, 2008
Which? Policy Holder Event Epilogue
Which? Policy Holder Event Epilogue
Last week Which? held a policy holder event in Westminster for Norwich Union and Prudential policyholders, the objective being to publicise the Which? campaign for a fair deal for with-profits policyholders.
The day started with a photo-call with "Dick Turpin", where they called on the Financial Services Authority to "stand and deliver" for policyholders.
They were then joined by John McFall MP, the Chairman of the Treasury Select Committee and Derek Wyatt MP, a supporter of the campaign.
After the photos, they went to a meeting in the House of Lords hosted by Lord Joffe, who has been campaigning on this issue since 2000. Vince Cable MP, the Liberal Democrat Shadow Chancellor, expressed support for the campaign and discussed his involvement.
This was followed by a roundtable discussion with Vince Cable MP, Derek Wyatt MP, policyholders, their constituency MPs and Which? policy expert Dominic Lindley.
Which? intend to continue the campaign.
Last week Which? held a policy holder event in Westminster for Norwich Union and Prudential policyholders, the objective being to publicise the Which? campaign for a fair deal for with-profits policyholders.
The day started with a photo-call with "Dick Turpin", where they called on the Financial Services Authority to "stand and deliver" for policyholders.
They were then joined by John McFall MP, the Chairman of the Treasury Select Committee and Derek Wyatt MP, a supporter of the campaign.
After the photos, they went to a meeting in the House of Lords hosted by Lord Joffe, who has been campaigning on this issue since 2000. Vince Cable MP, the Liberal Democrat Shadow Chancellor, expressed support for the campaign and discussed his involvement.
This was followed by a roundtable discussion with Vince Cable MP, Derek Wyatt MP, policyholders, their constituency MPs and Which? policy expert Dominic Lindley.
Which? intend to continue the campaign.
Tuesday, June 24, 2008
Which? Policy Holder Event
Which? Policy Holder Event
Which? has confirmed that it will be holding an event for policyholders on 25th June tomorrow at Parliament. It will take place between 1-3pm.
The event will give policyholders a chance to take part in a photo opportunity, and attend a reception in Parliament with Which? and politicians involved in their campaign to secure a fair deal.
Which? has confirmed that it will be holding an event for policyholders on 25th June tomorrow at Parliament. It will take place between 1-3pm.
The event will give policyholders a chance to take part in a photo opportunity, and attend a reception in Parliament with Which? and politicians involved in their campaign to secure a fair deal.
Friday, June 20, 2008
Barmy FSA Regulation
Barmy FSA Regulation
The Treasury Select Committee has published their report based on their inquiry into inherited estates. The Committee is none too complimentary about the Financial Services Authority’s (FSA) regulation of the with-profits industry.
Quote:
"The Committee concludes that the Financial Services Authority (FSA) is not providing a robust enough framework to manage the conflicts of interest inherent in proprietary life funds."
I am hardly surprised, the FSA's "regulation" has been all but non existent.
Chairman of the Committee, the Rt Hon John McFall MP said:
"The approach taken by the FSA towards inherited estates seems a long way from the philosophy of 'principles-based regulation' to which it aspires. Policyholders need to have confidence that their interests are being protected, but the current oversight by the FSA gives no such assurance.
Policyholders deserve a regulatory framework based on a clear set of principles and unambiguous guidance on how inherited estate can be used by life firms’ management."
He refers to FSA regulation as "barmy":
"Shareholder tax is another example of the FSA's barmy regulation in this field."
He then goes on to put a well aimed boot into Prudential:
"I was astonished that the Prudential had taken £1.6 billion from their inherited estate to pay the costs of compensation arising from mis-selling."
Then Norwich Union:
"Tens of thousands of Norwich Union’s longest-standing policyholders do not stand to receive the whole value of the recently announced special distribution. The Committee was not convinced by the argument that such phasing of payments was necessary for the stability of the funds concerned.
In my view, phasing represents an unreasonable barrier for policyholders wishing to exit the fund."
The Committee calls on the FSA to take action in several areas to ensure that policyholders interests are protected, including the following:
It is clear that those with money stuck in these lousy endowment funds have been ill served by the FSA. It really is worth, in my view, considering mounting a class action against the FSA and the life assurance companies for this disgraceful situation.
The Treasury Select Committee has published their report based on their inquiry into inherited estates. The Committee is none too complimentary about the Financial Services Authority’s (FSA) regulation of the with-profits industry.
Quote:
"The Committee concludes that the Financial Services Authority (FSA) is not providing a robust enough framework to manage the conflicts of interest inherent in proprietary life funds."
I am hardly surprised, the FSA's "regulation" has been all but non existent.
Chairman of the Committee, the Rt Hon John McFall MP said:
"The approach taken by the FSA towards inherited estates seems a long way from the philosophy of 'principles-based regulation' to which it aspires. Policyholders need to have confidence that their interests are being protected, but the current oversight by the FSA gives no such assurance.
Policyholders deserve a regulatory framework based on a clear set of principles and unambiguous guidance on how inherited estate can be used by life firms’ management."
He refers to FSA regulation as "barmy":
"Shareholder tax is another example of the FSA's barmy regulation in this field."
He then goes on to put a well aimed boot into Prudential:
"I was astonished that the Prudential had taken £1.6 billion from their inherited estate to pay the costs of compensation arising from mis-selling."
Then Norwich Union:
"Tens of thousands of Norwich Union’s longest-standing policyholders do not stand to receive the whole value of the recently announced special distribution. The Committee was not convinced by the argument that such phasing of payments was necessary for the stability of the funds concerned.
In my view, phasing represents an unreasonable barrier for policyholders wishing to exit the fund."
The Committee calls on the FSA to take action in several areas to ensure that policyholders interests are protected, including the following:
- To ensure that a fair price is offered in a re attribution, not just an adequate price.
- To provide a very strong case about why the phasing of special distribution payouts should be permitted, noting that the FSA has yet to put forward an adequate case.
- To consult on a redesign of the overall regulatory system for with-profits funds during 2008. The Committee said that they are not satisfied that the FSA has done enough to provide a robust framework.
- To consult on the charging of shareholder tax to the inherited estate by the end of 2008, noting that their view is that it should not be permitted.
It is clear that those with money stuck in these lousy endowment funds have been ill served by the FSA. It really is worth, in my view, considering mounting a class action against the FSA and the life assurance companies for this disgraceful situation.
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