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Last Updated: Monday, 7 June, 2004, 08:43 GMT 09:43 UK
Ask the expert special: Endowments
FSA headquarters in Canary Wharf in London's former docks
The regulator's head office in Canary Wharf

BBC News Online's Ask the Expert column gives readers a chance to have their financial questions answered.

The most frequent questions we receive concern endowment mortgages, a type of home loan that relies on a stock market-linked investment to repay the mortgage debt. They were widely sold in the 1980s and 1990s.

Many borrowers were told their loans were guaranteed to pay off their mortgages, but some of those promises have fallen well short.

It is estimated 3.5 million households are now facing shortfalls of more than 5,000 on their loans.

But how do you know if your loan is facing a shortfall? Can you qualify for compensation? And how do you navigate the endowment redress minefield?

In the second part of a special series, the Financial Services Authority, responsible for regulation endowments, provides answers to questions based on your most common queries.

I bought my endowment policy through a building society, but everything we read about endowment mis-selling talks about insurance companies. Should I pursue a claim for mis-selling against the lender, the person who advised me, or the insurance company?

Endowments were sold through a variety of sales channels. Many were sold directly by the insurance company, or by their appointed representatives, often based in the offices of estate agents or building societies.

However, a significant proportion were sold by independent financial adviser firms, including solicitors.

Where the original literature indicates that the person who advised you only sold the products of just one insurance company then you should raise any complaint with that insurance company.

If the company was an independent financial adviser or you are not sure, then raise your complaint with that company.


The presence of a shortfall does not in itself mean that you have been mis-sold the product.

Endowments are investment products and their final value is dictated by the performance of the stock markets.

Poor performance of your endowment is not therefore mis-selling. The mis-selling occurs when the risks that this product may not deliver the expected target sum, i.e. the sum needed to repay the mortgage was not explained to you, or if the product was not suitable for your particular circumstances.

I bought my policy before 1988. Is there anything I can do?

Regulation of these products was first introduced and a compensation scheme created in 1988. This provided more stringent rules for how a product should be sold.

The FSA's position on complaints against policies sold pre-1988 is that firms should look at all complaints and handle them fairly.

To maintain confidence in the financial system
Promote public understanding of the financial system
Secure the appropriate degree of protection for consumers
Reduce the potential for financial firms to be used for financial crime

If a consumer feels that their complaint has not been handled fairly then the consumer may be able to take their complaint to the Financial Ombudsman Service (FOS) if the firm is part of the "voluntary jurisdiction"; this is where a firm was part of a predecessor ombudsman scheme.

Most large firms have signed up to the voluntary jurisdiction.

If you bought through an IFA before 1988 then approach the IFA to see if they will handle your complaint.

Because many IFAs did not sign up to the "VJ" you may find you cannot take your complaint to the Ombudsman. You can seek legal advice or help but this may be costly.

You can find more about complaining about endowments from our fact sheet "Endowment complaints".

I bought my endowment through my estate agent, and believe I was mis-sold to. Can I claim compensation?

An endowment is an investment product and can only be sold to you by a firm or adviser who is authorised to do so by the Financial Services Authority.

While we do not regulate estate agents, the person in the estate agents who sold you the product would have been authorised to do so.

You should contact the estate agent and ask to whom you should address your letter of complaint. If you do not know where the company is now, check the Financial Services Authority register (see link on right).

In 1988 I remortgaged and was given a non-status mortgage provided I signed up for an endowment. The policy matures in 2013 and there will be a shortfall. The broker who arranged this is no longer in business. Where do I stand?

If the firm who sold you your endowment has gone out of business the Financial Services Compensation Scheme may be able to help if you have a complaint.

The FSCS was established to give compensation to consumers who have been mis-sold by a firm that is now insolvent. Contact them either by email enquiries@fscs.org.uk or telephone 020 7892 7300 (see link to website on right).

What are the time limits for raising complaints and are there any exceptions?

You must make a complaint within three years after you were first aware there was a problem with your endowment. This would mean three years after the receipt of your first "red letter" which warns you that you have a potential shortfall.

The red letter is a letter from your endowment provider which gives you a reprojection of the sum that you can expect to receive on the maturity of the policy. The letter is coded red when the projected amount will have a shortfall of the target amount even if the performance of the policy is at the highest interest rate set by the insurer.

From 1 June the letters will be colour-coded red so consumers are better aware of their policy's status.

From 1 June firms will also need to give you six months notice of the date your right to complain expires.

Firms that issue a reprojection letter will have to give a final date when a consumer has to complain if the firm intends to employ a time bar.

Financial Ombudsman Service: 0845 080 1800
The Financial Services Authority: 0845 606 1234 (from UK) 020 7066 1000 (from overseas)
Financial Services Compensation Scheme: 020 7892 7300

The notice that contains this date must be given six months beforehand. There is a transition period for those consumers who would have been time barred between the 1 June and 30 November but have not had the benefit of a final date.

Firms must give these consumer a final date, but the notice period is a minimum of two months from when the final date to complain will expire.

In practice, some consumers who are due to be time barred closer to 1 June may receive a little more time.

All consumers must have the full three years, from when they became aware of a problem in which to complain.

Some firms have decided they will not time bar their consumers so do not include a final date.

However, consumers should be aware that if they did not buy their endowment through the insurance company that provided the product, then the person they bought the product through may still want to employ the time bar.

The reprojection letter should make this clear, but if they have any doubts they should check with the person who sold them the product.

If the company is not following the rules then the FSA can take action to ensure that they do.

A consumer, if dissatisfied with the firm's decision can go to the Ombudsman who will look in to their case.

I bought an endowment, but not in conjunction with a mortgage. I believe I was advised poorly. Is there any chance of redress?

Endowments have been popular saving vehicles even for those without a mortgage.

An endowment is, however, still an investment and as with any other investment, if you think you have been mis-sold you can make a complaint.

You can still have been mis-sold if the risks of the product were not explained to you, even if you were not intending to use the endowment to pay off the mortgage.

This must be to the firm who sold you the endowment. Firms are required to consider every complaint and also give referral rights to the Ombudsman.

If the firm will not accept your complaint , you can go to the Ombudsman who will look into the individual case. Consumers can phone our helpline for information or use our generic leaflet for making a complaint.

See our guide to making a complaint, which can be accessed through the consumer section at the FSA's website.

The opinions expressed are those of the FSA and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.




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