The endowment problem
There are two main consumer problems with endowments: shortfalls and mis-selling.
There are two main consumer problems with endowments: shortfalls and mis-selling.
In the UK more than ten million endowment policies were sold as a means of paying off a mortgage.
An endowment mortgage combines an interest-only mortgage and an investment (the endowment policy). Throughout the term of the mortgage (usually 20 or 25 years) you pay interest on the amount borrowed to your mortgage lender and a monthly premium to your endowment policy. The endowment premiums are invested and the idea is the endowment produces enough capital at the end of the term to pay off the mortgage.
Now consumers are facing two major problems: shortfalls and mis-selling.
If your endowment policy hasn’t increased enough to pay off your mortgage, this means you have a projected shortfall and you will have to find some other way to pay off this part of your mortgage.
Millions of endowment policies are predicted to fail to pay off the mortgages they cover.
Many consumers never understood that it was possible to have a shortfall because they believed the policies were safe, or guaranteed to pay off their mortgage.
You should have received several letters from your endowment provider over the past few years explaining how your endowment policy is performing and whether it's likely to meet its target amount (ie pay off the mortgage at the end of the term). If you have a shortfall or you are just worried, you must take action now to tackle it.
If this problem doesn't apply to you but you're concerned about family or friends with a shortfall - or think they may have been mis-sold their endowment - why not email them with the address of this web site and make sure they have up-to-date information to help them.
Millions of people may have been mis-sold their endowment policy in the first place, meaning that the policy was inappropriate for them.
There are many reasons why an endowment policy may not have been suitable for you but broadly, if you were not informed of the risks associated with using an investment product to repay your mortgage then you may have grounds for complaint.
If you were mis-sold an endowment you may be entitled to compensation. Have a look at our grounds for complaint page and about mis-selling information to work out whether you were given bad advice.
Remember - you are complaining about the advice you received when you bought your endowment, not the fact that you have a shortfall.
If you decide to make a complaint, we have information on the complaints process and a complaint letter generator to help you.
It's really important to take action quickly. There are time limits on making a complaint and if you wait, you may run out of time to complain.
Endowment compensation calculator We've heard of many offers of compensation being wrongly calculated. If you are unsure whether your offer of compensation is correct, you can now check this using an external online calculator. The calculator has been produced by the same company that supplies the redress calculation package to the Financial Ombudsman Service, The Financial Services Compensation Scheme, the Law Society and over 95 per cent of the industry. A fee of £52.50 applies.