# Poor Performance Of Endowment Policy



## patsy (12 Aug 2008)

Just received my annual update of 20 yr mortgage endowment policy ( due to mature July 2009 ). Was supposed to pay off £25k ( €31k ) loan but probably won't reach €25k. Luckily policy is not assigned as I got nervous about it when I was taking out new mortgage in '93 but surely the insurance co. can't get away with miss-selling these products. I was assured it would pay off the loan and hopefully provide a little extra as well. Also something slightly sinister among the accompanying notes and I quote _"it should also be noted that your mortgage interest repayments have reduced over the past number of years due to the fall in interest rates"._ What business is it of theirs what interest I have paid?. Anyone in the same boat?


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## LDFerguson (13 Aug 2008)

patsy said:


> Luckily policy is not assigned as I got nervous about it when I was taking out new mortgage in '93 but surely the insurance co. can't get away with miss-selling these products.


 
If you have a written promise of £25,000 from the company, you could have a case for mis-selling.  If not, it would be a hard case to win.


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## Bronte (13 Aug 2008)

Lots of people who took out endowments were 'promised' they would pay off the mortgage and give you a lump sum.  If this 'promise' can not be proven you would be on shaky ground to prove misselling.


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## roland (13 Aug 2008)

patsy said:


> Just received my annual update of 20 yr mortgage endowment policy ( due to mature July 2009 ). Was supposed to pay off £25k ( €31k ) loan but probably won't reach €25k. Luckily policy is not assigned as I got nervous about it when I was taking out new mortgage in '93 but surely the insurance co. can't get away with miss-selling these products. I was assured it would pay off the loan and hopefully provide a little extra as well. Also something slightly sinister among the accompanying notes and I quote _"it should also be noted that your mortgage interest repayments have reduced over the past number of years due to the fall in interest rates"._ What business is it of theirs what interest I have paid?. Anyone in the same boat?



I think the logic is that the value projected for 2009 at the time you took out the policy assumed a fairly high growth rate - probably in line with high interest rates at the time.  Growth rates have been lower than that which accounts for the fact that you won't hit your 31k.  However, in line with growth rates being lower, interest rates have also been lower.  This fact is being pointed out to you as endowment policies are normally linked to the continuing payment of interest on the full loan amount.


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## Marc (13 Aug 2008)

Roland, 

This is exactly the case. Back in the late 1980s and early 1990s with interest rates of high double digits,assumed growth rates were much higher than actually turned out to be the case and low contributions were assumed to be sufficient to accumulate over 20 or 25 years. 

Obviously the interest payments to the lender were also higher than now. Remember that the total payments for an endowment mortgage are the sum of two parts: a payment to lender and payment to an Assurance Company. These cannot be viewed in isolation although these contracts were rarely very well explained.

What the Assurance Company is implying is that any borrower had the benefit of the fall in interest rates and consequently could (should) have saved the difference to make up any shortfall on the payout.

This is absolutely the case and of course where a borrower had been advised to do this for the last 18 years, they would have managed the "problem" away.

The reality is that sadly, many people who bought (were sold) an endowment mortgage have not heard a squeak from the original "adviser" who sold them the policy, and no such advice has ever been forthcoming.

That said there is clearly a balance of responsibilities here. 

Borrowers may feel that Mortgage Lenders could have pointed out to them that reductions in interest payments should have been used to cover any possible shortfall building in their endowment policy. But of course, in many cases, the policy wasn't sold by the Lender so it isn't their legal responsibility (although perhaps they were morally bound to offer more help than many did). 

The Endowment issue clearly won't go away until the majority of the policies sold have matured which is unlikely to be much before 2020 and anyone with an existing policy needs to carefully consider their position and weigh up their options. 

I have had cases where we have been able to select against the Assurance Company and apply for a surrender value which is valid for a period of time prior to maturity and then to apply for the higher of the surrender value and maturity value.

This may sound counter-intuitive but with persistent cuts in Terminal Bonus payments on With Profits Policies, it is perfectly possible that a surrender value could be higher than an maturity value.

What to do with an existing endowment policy is an extremely complex area requiring experience and understanding of the second-hand market as well as the workings of the various contracts on the market. Professional advice should always be sought before making any decisions regarding an existing policy.


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## Dubtub (14 Oct 2008)

I have just been reading the recent blogs on this subject and their seems to be a lot of quasi-legal/commercial waffle in what has been said.  The inescapable point is that these products were miss-sold and the UK authorities clearly made that judgement.   In 1990, when I took out a mortgage, my bank *unreservedly* recommended the Endowment product.  It was flavour of the month then and no other option was recommended to me at the time.  I specifically raised a point at the time - namely that I would be 3 years over retirement age when the mortgage period would be over.  Not to worry I was told, as there would be sufficient funds to pay the mortgage during my years without a salary.  This was a key issue with the UK authorities who took this as clear evidence that the Endowment product was miss-sold and the customer mislead.  Thousands of UK customers were remunerated.  What is the difference in Ireland?  Why are the Irish authorities so mute on the issue?  Right now my bank has offered me 2 alternatives.  (A) Increase my repayments by over 20% to meet any shortfall.  (B) Continue as before and be responsible for the shortfall at the end.  This is ludicrous as the customer is funding the commercial errors made by the institutions when their investment expectations were not realised.  This is a commercial decision that went wrong and the insistence that the mortgage holder pays up is unjust and would not be feasible in any other sphere of business.


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## macy9 (7 Jul 2009)

Sorry for bringing this back from 'o8 but my mum is currently in this situation. Her policy cover was 220 euro and BOI have hiked it up to 620 euro. Which im essentially paying for her.

Trying to get out of her what was said when they sold her this policy is a non-starter as she's a tad fickle  I recently read an article at the weekend where people had successfully brought this issue to the ombudsman but we have since been told that we need to talk to the bank before approaching the ombudsman.

This is not in my realm of experience. Anyone got any advice.

Unbelievably, the loan was taken out in 1989 for only  20,000 and  she's still paying it up until 2010.


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