Some of you may remember my raising the issue of discrimination against a benefits claimant who happened to have taken out an endowment mortgage some years before he became disabled.
It was correctly pointed out that "discrimination" was unlikely to be the correct term for someone in his position.
However, he is in somewhat awkward situation, created by the benefit rules.
The BA currently pays his mortgage interest while requiring him to pay the endowment premiums. He has been offered the usual endowment mortgage compensation package by the insurer i.e. a small lump-sum plus the option of surrendering the policy and replacing it with life cover at 1988 rates for someone with his 1988 health and age status.
If he does the latter, and puts the bigger lump-sum (i.e. SV plus compo) in the building society, together with an additional monthly payment in lieu of the endowment premium, the BA will reduce his benefit, even though it is simply his replacement mortgage repayment vehicle.
If he uses the same money to pay down the mortgage, he saves the BA interest, with no benefit to himself, and is looking at a significant shortfall on his mortgage at maturity or a crisis with his mortgage lender now. That unsatisfactory situation (of a shortfall) is unavoidable whatever he does, but if he could hold on to the lump sum he could at least invest it for a modest return.
He has no confidence in the endowment policy even returning his premiums over the next 7 years (and if I told you which company it was, I suspect that you would agree).
I am told that if he buys an investment product, instead of simply putting the money on deposit, the BA may simply treat it as a substitute for the endowment.
Any views on whether the latter point is correct, and if so, whether there is a low-risk product worth considering ?