key questions

Endowment complaints - common problems and key questions

Common questions about endowment complaints

*PLEASE NOTE*

This site is for information purposes only - we are not accepting any new cases from January 2007

Not all endowment complaints involve straightforward circumstances. The following questions along with the answers provided, may help to clarify key problem areas for potential claimants - click on the question to view the details.

1) What is a "time bar" and how can it affect your right to complain?

2) If you are possibly time barred - is there any point in complaining?

3) If you surrender a policy - can you still complain?

4) Can you complain if you have already switched to a repayment mortgage but have retained the endowment policy as an investment?

5) Can you claim if my mortgage has been paid / redeemed?

6) If a policy was purchased before 1988 - can you actually make a claim?

1) What is a "time bar" and how can it affect your right to complain.

This is probably the most controversial issue of all. The Financial Services Ombudsman has ruled that a customer may be time barred (in other words prevented from making a complaint) when a three year period elapses from the date of a RED warning letter.

A "red" warning letter sends a clear message to the customer that there is a serious problem with the endowment plan. The letter must state that there is a "high risk" that the plan will fail. (Any other language or term used will be insufficient)

The Ombudsman summarises the situation as follows:

"There are strict time-limit rules for complaining about mortgage endowments. In June 2004 the industry regulator, the FSA, told financial firms that they must give customers a clear "final date" for making a complaint. Once this final date has passed, you will be too late to complain - either to the firm or to the ombudsman service - because your complaint will be time-barred".

Read all correspondence received from the endowment provider carefully. Look out for key dates and deadlines - usually in bold letters. If you are in doubt about a time bar. Telephone the endowment company and ask them if you are out of time for claiming. They have to answer this point when questioned

Be aware that the time bar issue is going to become more and more prevalent during 2006. By the year 2007, most people will be out of time for complaining because the first batch of red letters in the majority of cases would have been sent out in 2003/2004.

News on time barring:

Small Claims Court victory on time barring

The Observer reports that "Endowment policyholders who have been barred from claiming for shortfalls on their policies by their insurers could win billions of pounds in compensation, following a ground-breaking court case.

An endowment policyholder has successfully sued for compensation on the shortfall on his policy, even though he failed to make a claim within three years of receiving a 'red warning letter' notifying him of a potential shortfall. Vincent Cunningham, a telephone engineer in London, was awarded £1,500 from Friends Provident after the hearing at Reigate county court" [1st May 2006]

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2) If you are possibly time barred - is there any point in complaining?

The issue regarding time barring is complex. The wording of any warning letter that a company seeks to rely upon will be scrutinised by the Ombudsman and tested for its adequacy. It may be that a letter falls short of the requirements (Ie the main one being that it must state that there is a "high risk" of shortfall) and any ambiguity will fall in favour of the customer.

It is therefore advisable to make sure beyond any doubt that a case is time barred. We strongly recommend that you enquire with either a complaints handler such as The Claims Connection, the endowment company or the Ombudsman to determine the issue once and for all. Be certain of the facts before you give up on your case.

3) If you surrender a policy - can you still complain?

This is a very common situation. Many people have decided to sell or surrender their policies because of the flood of bad press that has hit the endowment market since 2000.

If you have surrendered a plan, providing that the investment was failing at the time of the policy being terminated (in other words you had received a shortfall notice and preferably a "red" warning) you may indeed still be able to complain.

As well as receiving standard compensation based on a direct comparison of a repayment v endowment mortgage, you may also be entitled to a refund of premiums plus interest from the date of the surrender in certain circumstances.

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4) Can you complain if you have already switched to a repayment mortgage but have retained the endowment policy as an investment?

A vast number of endowment policyholders have switched to a capital repayment scheme as an alternative method of repaying their mortgage debt. Yet the endowment may be retained for investment purposes.

Again, it is perfectly possible for you to complain about misselling of the endowment plan in these circumstances. Your argument may well be that you would have been better advised to be on a repayment scheme from day one. By choosing an endowment option, you may have been disadvantaged. The fact that you have switched to a repayment scheme late in the day does not prevent you from complaining.

5) Can you claim if my mortgage has been paid / redeemed?

If you are fortunate enough to have repaid your mortgage debt in full, perhaps ahead of schedule, but retained the endowment plan as an investment, you can still complain for endowment misselling - in most circumstances.

The principles remain the same in that you have been potentially disadvantaged from the time you acquired the plan and may have redeemed your mortgage sooner but for the misselling that took place.

In some cases you may be able to reclaim all premiums plus interest from the time of the redemption.

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6) If a policy was purchased before 1988 - can you actually make a claim?

It is a not correct to say that pre 1988 endowment policies are exempt from the complaint process.

Endowment policies sold before 1988 do not fall under the regulations imposed by the Financial Services Act 1986. The act introduced a new set of rules which completely altered the way certain financial products were sold or offered for sale. The rules applied to any financial agent whether they worked for a brokerage, bank, building society or insurer.

Unfortunately before the implementation of the act on the 29th April 1988, there were no clear rules that controlled the sector. Banks and building societies were self regulated and therefore had some guidelines and service standards to abide by. It is therefore possible to complain about any policy sold by a bank or building society BEFORE 1988.

On the other hand financial brokers (now known as independent financial advisers or IFA's) were not fully regulated and therefore you are unable to complain about a sale conducted by them PRIOR to 29th April 1988.

The Claims Connection "endowment policy complaints" section - UK compenstion specialists. Endownment problems

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