The Pain of Mis-selling
It seems that it is not just the hapless owners of underperforming and useless endowment polices that are suffering, sometimes a little of the pain and misery caused by these useless products is spread around.
Mis-selling endowment policies has cost Lloyds TSB has £150M this year, that is in addition to the £360M already paid out in recent years for compensation claims over a variety of financial products.
Lloyds TSB is still reviewing the total cost of compensating its customers, but admitted that this could lead to an increased provision in the accounts.
In a trading update before its 2005 figures, Lloyds TSB revealed that it would also need to set aside another £150M to cover the cost on insurance policies of people living longer.
Lloyds TSB is not the only bank facing claims for mis-selling of endowment policies. HBOS has had to put aside £260M over the last two years.
Lloyds TSB warned that customers were continuing to have difficulty repaying their debts.
How can people be expected to repay their mortgage, if the policy that they bought to repay the mortgage doesn't work?
Analysts at Dresdner Kleinwort Wasserstein have described Lloyds as "strategically challenged". There is now speculation that it may be a takeover target.
What goes around, comes around!
Wednesday, December 14, 2005
Thursday, December 08, 2005
Backing For Scottish Endowment Compensation
Backing For Scottish Endowment Compensation
Opposition parties in Scotland have publicly committed their support to the campaign to secure compensation for thousands of Scottish homeowners, who were mis-sold endowment mortgages by their solicitor.
Charles Kennedy, Liberal Democrat leader, and Alex Salmond, SNP leader, urged the government to close a legal loophole which leaves many Scots facing huge shortfalls.
People who bought a policy through a lawyer in Scotland, before December 2001, do not qualify for a settlement under the Financial Services and Markets Act.
Mr Kennedy said:
"It is an absurd situation if people in Scotland don't have the same protection against endowment mis-selling as homeowners in England and Wales. It must be put right immediately."
Opposition parties in Scotland have publicly committed their support to the campaign to secure compensation for thousands of Scottish homeowners, who were mis-sold endowment mortgages by their solicitor.
Charles Kennedy, Liberal Democrat leader, and Alex Salmond, SNP leader, urged the government to close a legal loophole which leaves many Scots facing huge shortfalls.
People who bought a policy through a lawyer in Scotland, before December 2001, do not qualify for a settlement under the Financial Services and Markets Act.
Mr Kennedy said:
"It is an absurd situation if people in Scotland don't have the same protection against endowment mis-selling as homeowners in England and Wales. It must be put right immediately."
Friday, December 02, 2005
Scots May Get Compensation
Scots May Get Compensation
Scots who claim they have been mis-sold endowment mortgages, may finally be compensated.
They have taken their dispute to Westminster, where MPs have signed a Commons motion demanding an end to a loophole which currently means that Scots who bought policies through lawyers are not due any settlements.
The House of Commons Treasury Select Committee is also calling for urgent action.
Scots who bought endowment policies through solicitors before December 1 2001, do not qualify for compensation from the Financial Ombudsman Service.
This was the date when the Financial Services and Markets Act came into effect.
This also means Scots who were mis-sold endowment policies by lawyers before the 2001 deadline, can only receive £1K maximum payout set by the Law Society.
Scots who claim they have been mis-sold endowment mortgages, may finally be compensated.
They have taken their dispute to Westminster, where MPs have signed a Commons motion demanding an end to a loophole which currently means that Scots who bought policies through lawyers are not due any settlements.
The House of Commons Treasury Select Committee is also calling for urgent action.
Scots who bought endowment policies through solicitors before December 1 2001, do not qualify for compensation from the Financial Ombudsman Service.
This was the date when the Financial Services and Markets Act came into effect.
This also means Scots who were mis-sold endowment policies by lawyers before the 2001 deadline, can only receive £1K maximum payout set by the Law Society.
Thursday, November 24, 2005
Never Ending Debt
Never Ending Debt
According to the Office for National Statistics, approximately 600,000 people over 65 still have a mortgage. This figure means that 10% of pensioners are still paying mortgages.
Apparently many pensioners are remortgaging, at expensive rates, because of a shortfall on their endowment mortgages.
It seems that a lifetime of debt is what many owners of these useless policies have to look forward to.
According to the Office for National Statistics, approximately 600,000 people over 65 still have a mortgage. This figure means that 10% of pensioners are still paying mortgages.
Apparently many pensioners are remortgaging, at expensive rates, because of a shortfall on their endowment mortgages.
It seems that a lifetime of debt is what many owners of these useless policies have to look forward to.
Wednesday, November 16, 2005
Compensation Shortfall
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.
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.
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.
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