selling a britannia life endowment policy

Mortgage endowment shortfall letter

Mortgage endowment letters

Mortgage endowment shortfall letters are arriving through letter boxes all over the country, and the bad news is that quite a few of the letters are stating that the endowment policies are not on course to pay off the mortgage. A number of options are outlines in these shortfall letters, and anyone receiving such a letter would be well advised to read it carefully and take note of what it has to say.

selling a britannia life endowment policyThe contents can be easily summed up, even if it may not seem so at first reading.

Basically the options are to take action and either seek a way of compensating for the shortfall by taking out a top up endowment, ISA, or other investment, or to make up the difference by converting the shortfall in to a repayment mortgage .

Many mortgage endowment holders, however, will be tempted to cash the policies in, use the money to reduce the mortgage, and convert the whole thing in to repayment so they know for certain that as long as they keep up the regular payments the mortgage is guaranteed to be paid of at the end of the term.

There is an alternative to cashing in the policy, but the warning letters seem to pay little, if any regard to this, with their legal responsibility apparently catered for by the insertion of a Financial Conduct Authority leaflet that makes mention to the fact that you can sell your endowment policy instead of surrendering it back to the life insurance company.

Should you decide to investigate the option of selling your endowment, you can use the links on this page to get it valued. You should receive a response within 48 hours.

The information on this web site is intended as "information only" and should not be taken as "advice". If you are unsure about what to do, if anything, about your endowment policy, you should consider taking advice from an independent financial adviser who is regulated by the Financial Conduct Authority

Latest news on endowments

135,000 families face endowment shortfall

by CLARE KITCHEN, Daily Mail

One of the big banks yesterday admitted that most of its endowment mortgage holders face a bill for thousands of pounds when their policies mature.

Lloyds TSB said its policies are performing so badly that half of the 270,000 it has sold are at serious risk of leaving owners in debt.

Another 124,000 are estimated to have a chance of leaving a shortfall, while only 10,800 are on track to cover the mortgage.

It is thought to be the worst example of the problems surrounding endowments, many of which were mis-sold to home-buyers by salesmen eager to bump up their salaries with commissions.

The huge numbers of Britons mis-sold endowment mortgages could cost the life assurance industry more than £1billion in compensation, the latest estimates say.

Lloyds TSB chose to reveal the scale of its problems after the Financial Conduct Authority stipulated that all insurance companies must let customers know the state of their policies by the end of this month.

It has shown that six million of the ten million endowments in Britain are underperforming and may not cover the cost of the loan.

Lloyds TSB blamed 'changes in the economic environment' but claimed that many of the policies were new and had not had time to benefit from long-term exposure to the stock market.

The scale of its problem has shocked mortgage experts. It compares with Scottish Amicable, where just under half of the policies are definitely on course.

Scottish Amicable has written to virtually all 817,000 policyholders and so far just two per cent of endowments are seriously at risk, while 49 per cent are risky and the rest are on course to cover the loan.

In contrast, all of Standard Life's 1.6million policies are on track. The company has promised to stand by all policies and top up any shortfalls provided future investment returns are at least six per cent a year.

A spokesman for the Financial Conduct Authority said policyholders should not panic as many under-performing policies could improve.

'Our advice is not to take this as a final verdict on your policy,' he added. 'The market goes up and down, so policies that are not doing so well can improve. But people should still be aware there is risk.

'They could either take out another policy to top up the shortfall or switch to a repayment mortgage.'

Some 300,000 people are estimated to be entitled to compensation from the mis-selling scandal, according to the Financial Ombudsman Service, which is receiving 400 complaints a week and expects up to 30,000.

It generally sees about one complaint in ten after policyholders fail to get satisfaction from the company which sold them the mortgage.

On average, it is finding in favour of the policyholder in about half of the complaints it investigates.

The FSA says the compensation awarded is on average£3,331.

The largest group of successful complaints are by people who were not properly briefed about the risks of investing in a policy which is linked to the stock market.

Read more:

Insurer rapped for blocking claims

Sunday Times January 15th 2006

CONSUMERS who are pursuing endowment mis-selling claims received some good news last week when the Financial Conduct Authority (FSA), the City watchdog, censured a life insurer for wrongly blocking complaints, writes Kathryn Cooper.
Guardian Assurance and a sister company, owned by the Dutch insurer Aegon, were fined £750,000 by the FSA for “serious systemic flaws” in their procedures for handling mortgage endowment complaints.

Up to 5,600 customers may have had their complaints wrongly rejected between January 2003 and late 2004 as a result of the flaws, according to the FSA. Guardian will now be forced to review their cases.

The number of claims that were upheld by Guardian fell from 71% in the second half of 2002 to just 23% in the first half of 2003, the FSA said.

There was also a big increase in the proportion of complaints upheld by the Financial Ombudsman Service after being rejected by Guardian.

The FSA hopes its tough action will ensure other endowment firms consider claims fairly.

Margaret Cole, its director of enforcement, said: “Guardian failed to treat its customers fairly. Those with a valid complaint risked having it rejected inappropriately and may not have received the compensation to which they were entitled.

“Firms must have robust complaints-handling procedures in place. The FSA will continue to monitor this area to protect consumers and promote good practice and we will not hesitate to take action where we see these rules being breached.”

Many consumers do not realise that there is a time limit, laid down by the FSA, on claims. You must lodge your complaint within three years of first receiving a “red” letter from the endowment firm. This letter would have informed you that there was a high risk that your policy would not pay off your mortgage.

Since July 1, endowment providers have had to send a letter reminding you of the time limit, six months before the deadline.

However, Guardian, along with Friends Provident and Royal & Sun Alliance, have barred customers who passed the three-year deadline before July 1, even though they may never have been told the limit existed.

You must complain first to the firm that sold you the endowment, which could be a financial adviser or the endowment provider itself, and go through its complaints-handling procedures.

If you are not satisfied with the result, you can then complain to the ombudman (0845 080 1800).

You should still be able to claim even if you sold the endowment in the second-hand market or surrendered it to the life insurer — as long as you are within the three-year limit.


Around 6m insurance policies designed to pay off mortgages are in real trouble - with home owners now facing a serious shortfall. We look at the role lenders played in the selling of them. Report by Rupert Jones and Tony Levene. Research by Nick Pandya

Rupert Jones, Tony Levene and Nick Pandya
Saturday May 18, 2002
The Guardian

Endowment sales hit the headlines again this week with the revelation that some six million endowments in Britain have little chance of reaching their target amounts, leaving homeowners facing large shortfalls on their mortgage repayment.

The number of endowments now in the most serious "red" category - where there is officially a high risk they won't grow by enough to pay off the mortgage - has more than doubled to 35% of the total compared with 15% last year.

Another 26% - more than 2.5m policies - are in the "amber" zone, which means there is a "significant risk" of a shortfall because they will need to notch up investment growth of 6%-8% a year to meet their target.

Since the beginning of 2000 the FTSE 100 index has fallen by a quarter, and unless there is a dramatic turnaround, millions of homeowners will be left holding endowments that will fall far short of the amount needed to pay off their home loan.

Many people will groan and curse when they open the so-called "re-projection letters" telling them they face possible shortfalls - in some cases running into tens of thousands of pounds.

While the focus has been on the insurers who provided the endowments, the mortgage lenders which actually sold people the problematic policies have to a large extent managed to keep themselves out of the spotlight of shame.

This week, Jobs & Money asked the leading building societies and banks responsible for selling huge numbers of endowments during the peak late 80s and early 90s period what they are doing to help their afflicted borrowers - and how much they have made in commission payments from their endowment sales.

Our research highlights how the sums of money it was suggested that endowment policyholders were likely to receive upon maturity were always going to be impossible to obtain. This is because these projected sums involved an estimate of charges which was just a fraction of the real level of fees taken from the policies.

The former building societies earned huge sums in commission payments from the sale of endowments. A typical policy would have generated around £1,000 in initial commission to the building society or bank which sold it.

All of the first year's premiums paid by the endowment buyer, and a large part of the second year's premiums, went straight into the pocket of the seller. But the commission bonanza did not stop there. On top of initial commission, the lender would typically have received what's known as renewal commission - a slice of every monthly endowment payment made by the borrower from then onwards.

One newspaper this week estimated that banks, building societies and financial advisers are still earning at least £125m to £150m a year in this way.

Needless to say, the information we were given in answer to our questions about how much they have raked in was scanty at best.

So we did our own digging and found that during the period 1988-89 alone - the peak of the endowment era, when an astonishing 2.1m plans were sold - the banks and building societies listed here pocketed more than £400m in commission payments.

The figures are taken from their 1989 report and accounts. They are for the total amount of "commission receivable" and include earnings apart from endowment commission, from selling things such as home and contents insurance. But it is likely that endowment commissions make up a large portion of the figure.

Rolled up over the years from the mid-80s until endowment sales tailed off in the mid-90s, it suggests that building societies may have raked in billions of pounds in commission - yet they have escaped almost scot-free from any liability to pay compensation.

Accountant Bryan Cooper, 56, from Conwy, North Wales is typical of the endowment victims who have contacted Jobs & Money.

He bought a £75 a month Scottish Widows plan from an IFA in 1992. It should repay £30,000 in 2012. In 2000 he was told it was "amber but almost green". Now, his plan is bright red. At 8%, it will return £23,200.

"It has only grown by 5.9% a year over the past decade when bonus rates were high. So I think the best we can hope for now is 4% which will give me £19,200 - £10,800 adrift and just £1,200 more than the premiums I'll have to pay."

Cooper says he is lucky in that he has spare cash so he intends moving to a repayment mortgage.

"I asked about paying no more and leaving it as paid up. I was quoted £11,300 at 4%. This is less than if I keep paying but I would have to chip in £9,000 to get £7,900 more. The surrender value at £7,507 is also less than the £9,000 I've put in."

"These policies were sold with the promise that they would comfortably achieve the required value," he adds.

What the building societies made out of it

Abbey National

Abbey was tied to Friends Provident for the sale of endowments between 1987 and 1992. It then sold them under the Abbey National Life brand. There are currently 180,000 Abbey National Life endowment policies in force. Customers getting letters warning them there may be a shortfall are being invited to meet a financial adviser. Abbey says: "People were not mis-sold endowment mortgages. It was always a case of 'the markets could go up or the markets could go down.'" Its 1989 report and accounts disclosed it received £95m in commissions from endowment slaes.

Birmingham Midshires

Birmingham Midshires says: "The responsibility for the performance of the endowment rests with the insurance company." The former building society is now part of Halifax. It is unable to supply figures detailing how many endowments its customers bought. According to its 1989 report and accounts it earned commissions worth £12.2m.

Alliance & Leicester

Alliance & Leicester was tied to Scottish Amicable for endowment sales between July 1989 and February 1996, when it stopped selling endowment mortgages. "We encourage people to seek independent financial advice and to speak to the endowment provider - Scottish Amicable," says A&L. "We don't have the details on their endowments. If you do find there is a problem speak to Scottish Amicable or speak to a financial adviser." Figures for commissions it earned in 1989 on endowment sales were unobtainable.


Halifax was one of the biggest sellers of endowments in a tie-up with Standard Life between 1989 and 1995. In total it sold 350,000 before switching to Pep/Isa-based vehicles instead. A spokesman said: "The commission we earned is a feature of the marketplace. We would never force someone out of their home because there is a small shortfall." Halifax's 1989 accounts show it earned £113m from commissions. It earns around £1m a year in renewal commission on its endowment sales.


Nationwide was tied to Guardian Royal Exchange from 1990 to 1995 for endowment sales. It then sold endowments under the Nationwide Life brand until 1999 when it ceased due to "low demand". The policies were sold by its staff in its branches, but it says: "We have no records of endowment sales on an individual basis as these were the responsibility of the insurers." Nationwide earned £109m in 1989 from "commissions receivable" according to its accounts.

Cheltenham & Gloucester

C&G sold endowments from an approved list - including Standard Life, Clerical Medical, Sun Life, Royal and Eagle Star - until 1988. It then tied to Legal & General until November 1993 when it ceased endowment sales - the first major lender to do so. Commission on endowments averaged £2.6m a year. Its 1989 accounts show it earned £18.5m in commissions from all sources.

Woolwich Life

Before 1990 the Woolwich sold the policies of several leading insurance companies. A spokesman for Woolwich Life, formed in 1990, said the company was "more than happy to assist customers with any problem they may have". Between May 1989 and October 1990 it was tied to Royal & Sun Alliance for the sale of endowments. It currently has around 75,000 mortgage endowments. Its1989 report and accounts showed it received £37.6m in commissions.


From 1987 to 1990, Britannia building society was an independent financial adviser. From 1990-1999 it sold 100,000 endowments through its own insurer, Britannia Life. Four-fifths are currently in shortfall, making it the worst performing life office. Britannic, a separate company, bought Britannia Life in 1999 and renamed in Alba. A spokesman says any compensation for mis-sold endowments must be paid by Britannic/Alba Life, and not the society. Its accounts for 1989 reveals income from fees and commissions of £17m.