87% believe they were mis-sold endowment policies

13 August 2008 / by Rebecca Sargent
Fairinvestment.co.uk has discovered that 87 per cent of Brits with an endowment policy believe that it was sold under false pretences.

A popular choice in the 1980s and 90s, endowment policies were marketed as a means of paying off an interest-only mortgage and having a lump cash sum left over.

The reality is that the majority of endowment policies have been left with a shortfall. In fact, a previous Fairinvestment.co.uk user poll found that 86 per cent of endowment holders are expecting a shortfall, meaning that they will have to stump up extra cash just to cover the mortgage.

For those who are expecting a short-fall, there is the option of making a complaint and asking for compensation. However, the policy must have been mis-sold in order to do this, meaning that the risks involved were not explained at the time the endowment policy was taken out.

When asked 'were you mis-sold your endowment?' a shocking 49 per cent of respondents, said that they had been given a guarantee that the policy would cover the mortgage.

Sharon Bratley, chartered financial planner at Fairinvestment.co.uk said: "Our results show that almost half of people questioned felt they had bought their endowment policy on a false promise. This is not just a case of a small purchase; this is thousands of pounds for a house that we are talking about."

A further 27 per cent believed that the risks were not made clear at the time the endowment was bought. The time frame within which to claim for compensation is currently either, six years from when the policy was bought, or three years since you realised your policy was mis-sold, however, an endowment policy must have been subject to a shortfall as well as mis-sold in order to claim compensation.

The main accusations against the companies that mis-sold endowment policies are that they had guaranteed the policy would cover the mortgage, or that the risks were simply not explained at the time of purchase. However, there are other reasons given that class as mis-selling as six per cent of people questioned believed they had been duped because the fees and charges had not been explained adequately.

A further three per cent believed they had been mis-sold their policy because they had been advised to cash in one plan and take out another, and two per cent had not realised it was a long-term commitment when they signed up to it.

Mrs Bratley added: "There are several reasons that somebody may have been mis-sold an endowment policy, including a lack of adequate explanation. An endowment policy is not a short term commitment, and this should have been made clear when the policy was bought, as should the fees and risks involved.

"Without this information people were unable to make an informed decision and should be able to claim some compensation depending on the circumstances."

Of those questioned, only 10 per cent believe that they were not mis-sold their endowment policy because they were made fully aware of the risks involved and the fact that it may not pay off the mortgage in full at the end of the policy.

Mrs Bratley continued: "The few that had the risks associated with an endowment explained at the time of purchase will be unable to claim compensation. For people looking to cash in their policy back to the insurance company, it is also worth getting a quote from an endowment broker who may be able to pay you more. If you are in doubt about your options you should seek independent financial advice.

"Fairinvestment.co.uk offers both selling endowment and endowment complaint services, just fill in your details and we will do our best to set you free from the burden of your endowment," she said.