Endowment Mortages

If there's one financial product that has hardly been out of the news in recent times, it's the endowment mortgage. There have been warnings for months now of disaster for those of us who were expecting an endowment to pay off our mortgage. Particularly those who bought them between 1987 and the early 90's.

What should if do if you have been mis-sold an endowment mortgage?

Millions of people have been sent colour-coded letters from their insurers informing them of possible endowment shortfalls. The letters are colour-coded to illustrate how likely it is that a policy will fail to pay your mortgage.

Red Letters.

This means that there is a high likelihood that the endowment will not grow sufficiently to pay off your mortgage.

Amber Letters.

This is not as serious as red, but it still means that there is some danger that your policy will not grow sufficiently. Your scheme must grow by more than the recommended 6% a year.

Green Letters.

In theory, this means you are in the clear, as long as your policy grows by 6% a year.

The Financial Services Authority estimates that, in total about 4m of the 10m mortgage endowment policies will be red, with another 2m amber.

What should I do if a shortfall is predicted on my endowment??

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If you feel you have been mis-sold an endowment mortgage do you have grounds to complain?

Making a complaint about your mortgage or endowment can be hard work. But if you have a problem that can be traced back to unsuitable advice or misadministration, you should be able to get redress.

You cannot complain about how your endowment has performed but you can complain about how it was sold. The most important issue is if the product was suitable for you at the time, and whether you understood what you were buying and the risks involved.

Check these points to see if you have grounds for complaint. Your insurer is likely to have to compensate you.

You were not told that endowments are invested in the stock market and are therefore risky and the salesman did not make it clear that the endowment may fail to pay off your mortgage. If you have been asked to increase payments you may have a stronger case. If the endowment matures after your retirement date. If you were advised to cash in your endowment and then take out another policy.

What if you don't fall into those categories?

Even if your situation is not covered by any of the above, you may still have a valid complaint.

Making a complaint about your mortgage or endowment.

First complain to the firm that gave you the advice about your mortgage endowment. If you are not sure whether that was the endowment company itself, your lender, or another financial adviser, complain to them all.

Do not complain straight to the Ombudsman: until you have to exhaust the complaints procedure of the company concerned first.

THEN state your case in writing as clearly as possible, quoting any policy numbers or customer reference numbers, listing events in date order, and enclosing copies of all relevant documents (never the originals).

Ask for a copy of the firm's complaints procedure, which should include a timescale for dealing with your complaint. If you don't hear back then write again setting your own deadline - 14 days is reasonable for a first response.

Keep all communication in writing, so you have a record of who said what and when they said it.

NEXT say what you expect the firm to do - such as correct the fault, return your money, or pay something for your distress.

IF your deadline passes with no response, write again setting another deadline. Send a copy to the company's chief executive (ask the company switchboard for his name or find out from a public library).

NEXT YOU may be offered compensation. Ask on what basis it is worked out, and do not be pressurised into accepting unless it is what you are looking for.

If you are not satisfied with the company's response, ask for a letter of deadlock. You can then use the independent complaints service provided by the Ombudsman scheme.

It does not cost you anything, and if you don't agree with his ruling, you can usually pursue your claim through the courts.

The firm should tell you which Ombudsman scheme to use.

If not, find out from the helpline run by the Financial Services Authority on 0845 606 1234

THEN PHONE the Ombudsman to make sure it is the right one for you, they can deal with your case, and to ask for a form. Note that the PIA Ombudsman, who deals with complaints about sales of investment products and independent advisers, may not be able to help if you took out your endowment before April 29 1988. He can only investigate sales made before then if the firm agrees. Contact the PIA Ombudsman to check if your firm is covered. Companies have to abide by the Ombudsman's rulings up to £100,000 for the Personal Investment Authority, the Banking and the Building Societies Ombudsman. If you have been offered compensation, the Ombudsman Bureau may be able to give you a view on whether it is reasonable or not.

The Financial Services Authority has a free guide on how to complain which includes details of how to contact all the Ombudsman's schemes.

Telephone 0800 917 3311 for a copy.

The FSA Consumer HelpLine - 0845 - 606 1234.

The PIA Ombudsman 020 7216 0016.

The Financial Ombudsman - 020 7964 1000.

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