Endowments policy...

[ummmm]

Got a letter through...saying..

RED ALERT: HIGH RISK OF SHORTFALL.
There is a high chance that your plan won't pay out enough to cover the target amount of XXX. If you have not already done so, we strongly suggest you consider taking action to make sure you'll be able to repay the whole of your mortgage loan.

What action can we take?

[Kathyan]

We had an interest only mortgage. The endowment would not have paid off the balance on maturity. We tried to get compensation, but that failed. So we opted for a repayment mortgage when it was up for review. We are more or less paying the same amount for repayment as we were for interest only. And, when the policy matures, we will still pay what we get into the mortgage to bring the payments down.

[hc4361]

Some mortgages penalise you if make extra payments, so check that out.
You should have been told that endowment forecasts are just that - forecasts, and they may do better or worse than forecast.
Depending on your age, you can opt to do nothing, see what happens when your endowment matures and re-mortgage to pay off the outstanding if necessary.
Some financiers expect endowments and other investments to do much much better over the next 5 years, so there is still hope that you will clear your mortgage.

[ummmm]

Thanks...The shortfall is not going to be a huge amount. I think he's going to have to make an appointment with his bank. He was only 21 when he took out the policy.

[boxtops]

This was the problem some years back, ummm, people were sold endowments on the basis that the benefits would be huge, and that there would be money left over when the mortgage was paid off. The interest payment on the mortgage was fairly cheap, the premium even more so - it was an attractive offer. However, they didn't tell people that it was a forecast wish not a promise, and there are a lot of people now in your situation. I am thankful that I've always had a repayment mortgage, it's been a weight round my neck for the last few years but the end is in sight, when it's paid it's paid. Talk to your bank - as others suggest - about switching to repayment - or there is nothing to stop you switching to another mortgage lender, you don't have to stay with the same company for the rest of the term. IMO.

[ummmm]

I said about switching.

The person who sold him the endowment said he HAD to take out insurance with a certain company. I've had quick read and it's crap. Not what he thought he had...

[boxtops]

That's mis-selling ummm, and you might be able claim against the lenders for refund on that. I'm going through that process at the moment in respect of an unsecured loan where we were told we had to take PPI - not quite the same thing as your mortgage endowment policy, but as others have said, it's worth a try.

[ummmm]

I would hold my breath. It's took him 15 years to look at the policy...lol

[boxtops]

Ah....! good luck anyway, let us know how you get on ;-)

[ummmm]

Will do...thanks :-)

[factor-fiction]

You should have received a leaflet with your Red Alert statement showing the options. Dasherman has set out some good options.
I think it's too late to claim for misselling now.

[Whoever]

If your endowment policy looks in danger of falling short to repay the mortgage, I certainly wouldn't throw any more money in the same direction. Set up a separate Cash ISA or another savings account with the best interest rate you can find and start parking your monthly £50 or whatever shortfall in there. Be aware that the higher the inflation rate rises, the bigger the risk that cash savings will progressively lose their value over the long term, but if you take out an equity ISA and invest in that as an alternative there's also a risk that the stockmarket could fall in value just as your endowment matures and you could still be left with a shortfall. You don't say how long your endowment has to run, which is also an important aspect in trying to decide how best to address your shortfall.

[annie0000]

If you want to claim about miselling of an endowment you must do it within so many (can't remember how many) years of first receiving a red warning letter. You need to prove that you were missold - usual case is that risks may not have been explained, also, as he was a young lad at the time I presume with no dependants, he would have no need for the life cover within the policy another reason for misselling. In terms of compensation, what you get is redress, they make a calculation (basis of calc defined b FOS/FSA) of what it would have cost to have a repayment v what you have been paying and how much balance you would have left if you had opted for a repayment. The money is then meant to allow you to convert to a repayment if you want.

The thing with time barring is that they need to evidence that they issued you a red letter and confirm when that was. Many companies no longer retain copies of their issued correspondence. They rely on the ability to recreate the letter that you should have had. If ithis is the case, it is worth complaining about mis-selling and if they respond that you are time barred, get them to prove that you were issued a letter. They may find this difficult to do........but don't tell them I told you ;o)

As for what to do about the shortfall, depends on what situation you are in. I would be tempted to part convert your mortgage to repayment or take out a new mortgage to cover the difference. That's if you are still relying on the proceeds to repay your mortgage loan. If you expect the shortfall to be small, you could let it run it's course and just pay the extra at the end or take a loan to pay it of, or just just sell up and move and pay them the shortfall out of the proceeds.

[ummmm]

Hi...

10 years left to run...

He already has an ISA and a savings account....

This was the first RED ALERT letter he's received.

Paying off the mortgage I don't think will be an issue....They are predicting 14k short. Still rather not pay that out in a lump sum though...especially when you're told your mortgage will be covered and you'll get extra on top...

[annie0000]

Definitely worth complaining then, there are various standard complaint letters about on the web, but do not be tempted to use a third party complaint management firm. It does not get you any more redress as companies all use the same calculation basis and you will be paying for nothing as your complaint will be considered on the same basis regardless. Things you need to put into your letter are:

That he was told that it would repay his mortgage with a lump sum left over
he was a young man with no dependents and did not require the life cover
he had no other stock market based investments at the time
he was not a financially aware person
he was a risk averse person.

If you need any help then give me a shout. :o)

[ummmm]

Cheers Annie...I'll show him that when he gets home :-)

[horseshoes]

Hi ummmm, we had a shortfall problem too. We had an endowment policy and our so called financial adviser sold us another one when we moved house to our present home in 1997. We had a HUGE shortfall of over £30. We went through the procedure of claiming a mis-sell, firstly to the company he worked for which was Allied Dunbar (I think a subsidiary of Zurich), then eventually to through the Financial Ombudsman. I think the procedure is designed to put people off because it was a LOT of work. Bless our solicitor's secretary; she found our ORIGINAL house purchase with endowment papers from 1986, and let us take them away to go through.It didn't help that our original mortgage was with a firm that no longer existed. It took us over 12 months but we got the whole shortfall back. Thank goodness - it made me sick with worry. When the financial adviser sold us the policy, he made it sound like a good way of saving a nest egg AS WELL AS paying off the mortgage. He even wrote a little card to put in our folder which said something along the lines of "enjoy your world cruise when it matures"! Apparently in 1997, he should have known that it would fail. It doesn't matter that it's not a large amount - the point is that if you were mis-sold you can get your short-fall back. Good luck.

[ummmm]

Cheers HS....

I'll see what he wants to do...then I'm sure I'll be back with how to go about it :-)

[factor-fiction]

The amount of any compensation paid is not to cover the amount of the shortfall- it''s to put you in the position you'd have been in if you'd had a repayment mortgage instead of an endowment. If it's the first red letter you may still be able to claim