Lender steering applicant to interest only mortgage

Be nice to see a common sense approach. No compensation for stupid people, no mad rush to sell houses in a rush, or make people homeless. Sell the house when they die, pay off the capital debt and what's left goes to the estate.

Oh, it's not a problem. We actually paid off our mortgage several years ago using windfall funds from other sources. And we got a bit of compensation for mis-selling, which helped top up the maturity value (which was indeed well below the loan value).

I just wanted to say that we *were* promised that the endowment would cover the loan. Not in writing, as Anthony, with his comfortable monopoly-protected income, gloats, but then no investment company will ever give you any promises in writing. They rely on your naivety instead.

The trouble is, of course, that this and other well-publicised scandals have killed their goose. The frantic selling of share-ISAs before the

2001 stock market crash; the banks and their PPI; the life insurance scam; and especially the private pensions disaster, have demonstrated to my generation that you never ever believe what these people tell you. And we are being very careful to pass that warning on to the next generation.

I always laugh incredulously when I hear government ministers or financial industry gurus "warning" that people are not putting enough into their pension pots. What? Hello? You expect us to put some *more* in, after what happened to the last lot?

Wrong. The basic sum assured was a guaranteed value of an endowment policy on maturity or earlier death. If the contract was on a "with profits" basis, then that guaranteed sum assured would be increased by the added profits - which, once added could not be removed.

But such a policy would not have been acceptable for a mortgage advance because of the initial shortfall in the death benefit. To cover this situation a combined endowment and decreasing term assurance policy was used, whereby the shortfall was covered by the latter policy where cover, in theory, reduced in time with bonus accumulations on the endowment, thus maintaining cover at the level of the static loan.

Absolute rubbish. It gave a GUARANTEED DEATH BENEFIT which was equal to the amount of the loan. That death benefit would have been paid if you died after paying only one monthly instalment premium!

I hope you got that in writing, given that long before that time it was made quite clear that future bonuses were NOT GUARANTEED and "past performance was no guarantee of future performance".

and which will be made up of an "annual" bonus and a "terminal" bonus

When I took out my policy the annual bonuses were of the order of 4-6% but they were reduced to 2% during the 87-89 crash and never went up again all through the noughties bomb when shares went up at 15% pa.

As for the terminal bonus, 20 years ago that was predicted to "double" final value of my policy. Now it is predicted to add 5-10% if I am lucky - god knows what happened to the difference between the above annual rise in shares and the bonus that was added at the time.

One not impressed investor

tim

That's completely different to the guaranteed minimum payment if kept to term

The death benefit is funded via a "normal" insurance policy, the premium for which is taken out of the invested sum each month, and works on the basis that 98+% of punters aren't going to die before the term ends.

The final value is funded by the expected investment gains

agreed

That's got absolutely nothing to do with the guaranteed minimum payment if the policy goes to term

BTW it's rude to shout - even when you are right

...plus the *guaranteed* sum assured under the endowment policy on which those "expected investment gains" are based.

The total death benefit was funded by a combination policy which embraced an increasing guaranteed benefit from the endowment element with bonus additions, and a deceasing term assurance to protect the shortfall of anticipated bonuses during the years of accumulation and provide a sum sufficient to clear the loan upon death.

Very true, but your statement that the guaranteed minimum sum was: "usually...less than the accumulated payments" is incorrect in the circumstances that I described and would be so for the greater term of the policy - and probably untrue for many that achieved maturity.

No. The guaranteed sum is the minimum amount payable. If the investment returns exceed this then more will be paid out, but the staring point for these investment gains is zero, not the minimum guarantee.

which was not the circumstances that I was repling to

No, it was not true for most that reached maturity. They may have paid (will pay) more on maturity, but they didn't (don't) guarantee more on maturity

Around 1,000 such complaints were rejected and The Financial Services Authority investigated the rejected complaints, as well as Allied Dunbar's internal procedures for handling such customer complaints, and while maintaining a majority of them, it fined the company £725,000 on 11 March

2004 for mishandling such complaints. In its decision, the Financial Services Authority noted that:

...complaint handlers had conducted poor quality investigations and there was a failure to gather sufficient evidence to make a fair assessment of both the consumer's attitude to the risk and the suitability of the sale.

Allied Dunbar stopped writing endowment mortgages in November 2001. It was not the only company fined by the FSA, and at the time this was only the fifth largest fine for offences related to endowment complaint mismanagement. Friends Provident had been fined £625,000 in November 2003, and five other firms had previously been fined a total of £5.2 million for their mismanagement of such complaints. The largest fine fell to Royal Scottish Assurance, which incurred a £2m penalty.

Ditto (except it was 1989) and was also told I could pay off the mortgage in about 18 years. Sadly they never wrote it down otherwise misselling kerching :-(

Andy

If you took yours out in 1990 you should be protected by the FSA scheme. I bought mine in the mid 80's before the protection existed.

We were also promised (verbally) that the endowment would pay off the mortgage and give me some extra cash on top.

+1

+2

snipped-for-privacy@news.>>> >>>

Thus jamming the housing market even further ?

You had to be quick though it stopped in August 1988, and caused a temporary spike in house prices...

Thirty years ago I got a mortgage off my bank. The manager sheepishly asked if I would consider an endowment mortgate. "No" I replied. The main reason they existed then was because the interest relief continued through the whole mortgage, whereas on repayment ones it tapered off.

what has whether or not people get compensation got to do with the housing market/

tim

Agreed. The guaranteed sum at inception is the initial endowment sum assured plus the value of the decreasing term assurance, which total is the guaranteed death benefit which should be equal to the loan. Bonuses are added to the endowment element year by year - and once added cannot be removed - thus the endowment's guaranteed death increases year by year. In theory the decreasing term assurance aspect should reduce by an amount per annum at most equal to the "projected bonus values" added rather than actual bonus payments, hence level cover, from a death benefit point of view, should be maintained during currency of the policy.

That is the original basis on which these policies were first set up which was by the insurance brokerage of one of the big five's banks in order to provide a low cost remedy for bank staff housing loans on an interest only basis. The criteria then were far, far stricter than in subsequent years in terms of bonus projections, and had the original model been adhered to there would have been far fewer of the subsequent problems with these policies

And who has said that they would?

Hindsight is a wonderful thing!