Guide to Endowment Mis-selling
If you have an endowment mortgage that you think was sold to you with unsuitable advice, you should be able to claim compensation from your insurer. You can't complain about how your endowment has performed, only about how it was sold.
The salient points are whether the product was suitable for you at the time, whether you understood what you were buying and the risk you were taking.
You may have grounds for complaint if:
- The salesperson did not explain that the endowment was a share-based investment and that the payout was not guaranteed.
- You were sold the policy on the understanding that it would definitely pay off your mortgage and provide a surplus, but instead it is forecast to fall short.
- You were single and did not require the life assurance element of the endowment, and the salesperson failed to make it clear you were paying for life assurance.
- The endowment matures after your retirement date and the salesperson failed to make this clear to you or told you that the policy would be worth enough at retirement to pay off your mortgage.
- If the salesperson failed to conduct a proper fact-find to discover whether you would have sufficient income in retirement to meet the mortgage and endowment payments.
- The salesperson persuaded you to cash in one endowment and take out another.
If you believe you fall into to one of the above categories, don’t give up or be fobbed off by your insurer. Do be prepared for hours of letter writing and follow-up phone calls.
Insurance giant Abbey was fined £800,000 in May 2005 for mishandling customer complaints about endowments. Several other big banking establishments that rejected the majority of endowment complaints put to them are expected to face fines and be forced to review how their endowments have been sold.
How to pursue your complaint
Over the past few years, every endowment borrower should have been sent a colour-coded letter by the policy’s insurers. Green letters mean the endowment is on track to clear the loan, amber letters say there is a potential shortfall, red letters mean shortfalls are likely.
You have three years to claim compensation, after which your claim could be ruled invalid.
To start, complain to the business that sold you the endowment. If you are not sure whether that was the endowment company itself, your mortgage lender, or another financial adviser, complain to all of them. You cannot take your complaint straight to the Financial Ombudsman you must complain to the company concerned first.
State your case in writing as clearly as possible, quoting any policy numbers or customer reference numbers, listing events in date order, and enclosing photocopies of all relevant documents. (Do not send originals).
Make a note of all verbal communications. Note the name of the people to whom you speak and record what was said and by whom. Follow up with a letter confirming each conversation.
If your complaint has not been satisfactorily addressed after eight weeks of your first letter of complaint, you can go directly to the ombudsman, who will deal with your case free of charge.
However, some companies are being given longer to deal with complaints because they are so busy. If this is the case you should receive a ‘holding’ letter telling you how long you can reasonably expect to wait.
Don’t be tempted to use firms that advertise the fact that they will handle your endowment problems. They won’t reduce the paperwork for you, and if you win compensation you will have to pay up to a third of it to these middlemen.
If you are offered compensation, ask on what basis it is worked out, and do not be pressurised into accepting unless it is what you are looking for. The general rule is that the compensation should put you in the financial position that you would have been in had you taken a repayment mortgage. Compensation will not be for the amount by which your endowment falls short of the original projections.
