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.

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!

Tax Investigation Insurance - Taxwise

Professional Cover Against the Threat of Costly TAX & VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute. The Policy has been designed to combat the costs and inequities of undergoing the ever-increasing number of HM Revenue & Customs random investigations.

Taxwise Coverage

The standard cover provides representation costs by registered accounting practices on your behalf, for up to £75,000 in any one claim, arising from:

-Income Tax Self Assessment full enquiries
-Income Tax Self Assessment aspect enquiries (if this option is selected)
-Corporation Tax Self Assessment full enquiries
-Corporation Tax Self Assessment aspect enquiries (if this option is selected)
-H M Revenue & Customs VAT disputes
-Employer compliance disputes PAYE/ P11D/ NIC
-IR35 disputes
-Now covers business's with an annual turnover of up to £10 million

To find out more, please use this link Taxwise

Lost The Plot

Lost The Plot

The FT is suitably scathing about the FSA decision to kowtow to the insurance industry wrt compensation payments for mis-selling endowment policies.

"So FSA has bottled it once again. Faced with pressure from the insurance industry, they have backed away from fully enforcing a ban on using policyholders' money to mis-selling bills.

The decision appeared in document CP 09/09: "Proprietary firms will no longer be able to pay compensation and redress payments from their with-profits funds, where they arise out of events that occur after the rule takes effect. The position in relation to events prior to the effective date will be unchanged."

So any compensation or redress from new mis-selling cannot come from the with profits fund, but for all past misdemeanours they can still raid policyholders' cash.

The Financial Services Consumer Panel describes this as a "backward step" and says that "having uncovered unfairness, the FSA should resolve it".

Predictably, the FSA has allowed intense lobbying from the powerful insurance industry to override consumer fairness. Reading through the comments from respondents in this consultation paper illustrates how many insurance companies are still living in the dark ages.

Some argued that policyholders have no interest or rights in any inherited estate that might exist in with profits funds. Others referred to previous consultation papers without appearing to have noticed that these have been overtaken by clarifications and later statements.

So once again the dinosaurs have outwitted the FSA and consumers will be left to pick up the bill as insurers continue to raid their savings to pay mis-selling bills."

Which? Campaign

Which? Campaign

Which? have launched a campaign to lobby the FSA to change its decision re allowing life assurance companies to charge compensation costs for mis-selling endowment policies against inherited estate.

Prudential has taken a staggering £1.6BN from the inherited estate to pay mis-selling costs, while Norwich Union (Aviva) has taken £202M and earmarked another £64M for future claims.

Which? thinks it is outrageous that firms can avoid paying the penalty for their mistakes. The FSA seemed to agree that they should change the rules but have gone back on their original proposals. Now the FSA say that they will only stop firms from charging for mis-selling on policies sold from July this year.

This new rule will be almost meaningless, as hardly any new policies are being sold and firms will be still be able to avoid paying the cost of any new cases that emerge of past mis-selling.

Which? have created template letters which can be completed and sent to MPs and the FSA in less than 2 minutes. They can be accessed via this link Which?

Aviva Halves Offer

Aviva Halves Offer

Aviva (formerly known as Norwich Union) has halved its offer to policyholders for a share of the company's surplus investment funds.

As noted on this site earlier this year, Aviva reneged on last year's offer of £1BN to one million policyholders.

Quote:

"It is a fair bet that any new offer will be lower, and that Norwich Union will seek ways to delay payment to their policyholders."

The policyholders in two with-profits funds are now being offered £500M of the firm's "inherited estate".

How ironic that Aviva took time out during a rapidly falling market to revise its offer. Cynics might argue that the timing was deliberate, thus ensuring that any payout offered would be reduced.

The Lautro 19

The High Court will take at least a month to decide as to whether to rule in favour of the FSA's appeal to avoid naming the Lautro 19.

The FSA presented new evidence this Monday, which focused on the FSA's argument that confidential information received by the FSA must not be disclosed without consent.

This relates to a Freedom of Information request by IFA Defence Union chairman Evan Owen in January 2005. The Information Commissioner ruled in August 2007 that the FSA had to name the endowment mortgage providers which misused Lautro projections in setting premiums.

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!

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.

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.