Mis-sold endowments: how to claim After you've made your complaint
Many people have been sent questionnaires by companies about mis-selling and these are an important part of the investigation of your complaint. Some of these questionnaires are similar to the one the Financial Ombudsman Service asks complainants to fill in, focusing on your circumstances at the time of the sale.
Some companies have sent out more detailed questionnaires asking about attitude to risk and current financial circumstances. If you get one of these, ask the company why all these details are necessary. It would also be prudent to answer the questions you understand fully and state the facts that you recall with clarity.
Companies often need detailed information from questionnaires because files have been destroyed (legislation allowed companies to do this after a certain number of years) and the questionnaire helps them investigate complaints.
How long should it take?
Due to the number of complaints, many companies have struggled to complete their investigations quickly.
After eight weeks, you're entitled to take your complaint to the Financial Ombudsman Service. However, if you feel the company is keeping you up to date with progress, it may be worth waiting for its decision before going to the Ombudsman.
If, on the other hand, the company has failed to keep you up to date with progress, it’s probably best to go straight to the Ombudsman after the eight weeks is up.
Compensation amounts
If your complaint is upheld and you have suffered a financial loss, you’ll be offered compensation. This is normally worked out by comparing your current financial position with the position you would have been in had you received suitable advice.
Broadly, this involves working out how much capital would have been paid off on a repayment mortgage (which you should have been sold at the start) and comparing that to the value of your endowment plan (the surrender value). If the first figure is more than the endowment's value, you have made a loss and compensation will be the difference between the two amounts.
The company may also make you surrender or sell your endowment policy so you can switch to a repayment mortgage should you wish to.
The projected shortfall on your endowment is not necessarily the size of your financial loss, and the compensation you receive will therefore not necessarily 'cover' the shortfall.
Once you’ve been compensated
Some people choose to surrender their policy when they've been compensated and, in some cases, companies can make you surrender your policy along with paying compensation.
If this applies to you, be aware that unless you take action to save elsewhere or to convert to a repayment mortgage, you may have nothing in place to pay off the mortgage at the end of its term.
Surrendering the policy will also mean you lose the life insurance included in the policy, which would cover the mortgage in the event of your death. Therefore you should consider replacing this life insurance with a new policy.
Paying off your mortgage
Whether you surrender the endowment policy or not, there are several options to ensure you pay off the mortgage at the end of its term.
You can use the compensation to pay off a lump sum from your mortgage and start another savings plan, for example in a bank or building society, cash/equity Isa. Some people convert all or part of their mortgage to a repayment basis.
If you decide to keep your endowment policy and continue to use it as the main means for repaying the mortgage you should remember that the shortfall may grow, but you will have no right to complain again or to seek further compensation for mis-selling.
It's essential that as soon as you're offered compensation, you consider your options to pay off the mortgage. If you're not sure what steps to take, you should consider seeking independent financial advice.
You’ve only got one chance
It’s important to note that once you’ve signed a full and final settlement agreement as compensation for your financial loss, it won’t be possible to seek further compensation in respect of the same complaint.
Remember, the shortfall amount is not related to the amount of compensation you receive. You’ll be compensated to redress the financial loss you have made.
The most important thing to do after receiving compensation is to consider how you’ll use the compensation and the value of your endowment if you surrender it. You'll need to make plans to ensure your mortgage is paid off at the end of its term.
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