Endowment policies were a very popular and much promoted financial product popular in the 1980’s and early 1990’s. They offered a cheap way of affording the monthly mortgage payments, whilst promising, at the end of their term, a lump sum sufficient to not only repay the capital owed on ones mortgage, but also to provide a handsome surplus of funds.
Overview
Endowment policies were a very popular and much promoted financial product popular in the 1980’s and early 1990’s. They offered a cheap way of affording the monthly mortgage payments, whilst promising, at the end of their term, a lump sum sufficient to not only repay the capital owed on ones mortgage, but also to provide a handsome surplus of funds.
The principle was that when you took out a mortgage, you also took out an endowment policy. Because you were only paying interest on your mortgage and not any of the capital, your monthly repayments were much lower than if you had taken out a traditional repayment mortgage. At the same time, the monthly payments you were making into your endowment were being invested into the stockmarket to provide your cash sum on expiry of your endowment policy - the policy also included an element of life insurance.
Endowment Misselling
Problems eventually came to light with many endowment policies. It was found that many would have large shortfalls in the amounts provided on expiry. Many people, after many years of making payments into their policies would not have sufficient funds to repay their mortgages.
It transpired that many of these endowment policies were missold. Some were totally unsuited to the individuals’ needs when they were first sold to them – they would blatantly have been better off with another type of mortgage, or the full workings of the policy were not properly explained at the time of sale. Some people were unaware that they were actually paying into a fund that was being invested into stocks and shares. Others were shown totally unrealistic projections as to the kind of returns that they could expect.
There are actually over 10 million endowment policies in the UK, most of which will never reach their projected target on maturity, and it is thought that about half of these have been missold.
So the leading question….why did this happen?
Well, a large reason why these policies were so widely and enthusiastically promoted may have been that the salesmen earned very big commissions from them.
Time is running out for missold endowment holders.
The first thing you must know if you are a victim of endowment misselling is that time is running out fast. You must take immediate action if you are seeking compensation. By now you will have received a letter from your policy provider informing you that your policy has a high risk of a shortfall. This letter will specifically state that you are at ‘high risk’, and policy providers will apply a time bar of 3 years after your receipt of this letter for you to take action.
If you have not already taken steps to claim compensation for your missold endowment, you must act IMMEDIATELY, to ensure that your endowment misselling complaint qualifies to be considered.
Action to take
To set the process rolling, the first step is to make a complaint to the endowment policy seller. This will be either the IFA, building society or the policy provider that originally sold you the policy. You can choose to do this either as an individual or via a specialist firm that specialises in endowment misselling claims. Statistics show that of the many policy holders who try to gain compensation for themselves, most end in failure. You will probably be far better off using one of the many firms that specialise in these claims.
Having made an initial complaint, you will receive a questionnaire. You must complete this questionnaire and return it to the policy seller. This must be done without delay, as this document is what the policy provider will judge your claim by. You should receive a response as to their decision within two months.
If your complaint is accepted by the policy provider, they will make you an offer of compensation. The decision is yours as to whether to accept or reject this offer. Should you reject the offer, or indeed should the provider reject your claim, you have the option of pursuing the matter further with the FOS. In this case, the decision of the FOS is final.
Whatever you decide to do regarding your missold endowment, the clock is ticking, you must act now!
