When should I complain to the firm?
You should complain to the firm that sold you the endowment policy as soon as possible after you realise that you have cause for complaint. If you delay making a complaint, you could lose the right to some or all of any redress that may be due to you, as there are time limits within which you must make your complaint. An important time limit is that you usually have three years from the time when you became aware (or ought reasonably to have become aware) that you have cause for complaint.
A firm can usually reject your complaint as being out of time – known as ‘time barring’ –
if you are outside these time limits. It can also ask the Ombudsman to reject the complaint on similar grounds.
Firms can choose not to apply time bars but most do so.
How do I know when the three-year time limit ends?
Since 1 June 2004 a firm can usually only time bar an endowment complaint if:
_ you complain more than three years after receiving a red reprojection letter (or a similar letter warning you that there is a high risk that the policy will not reach the target amount); and
_ it has given you six months’ notice of the date after which the complaint would be time barred.
I made a complaint but the firm told me it was time barred by the end of 2003. I wasn’t told that the time limit for my complaint ended then. Why?
Between 1 February 2003 and 31 May 2004 our rules allowed a firm to time bar an endowment complaint if you made the complaint more than three years after the first red reprojection letter and more than six months after you received a second similar warning or reminder of the need to act. So during this period firms did not have to warn you of the actual date after which your complaint would be time barred.
When should I complain to the Ombudsman?
If you are unhappy with the firm’s decision, you should complain to the Ombudsman within six months of the firm sending you a ‘final response’ letter. Even if your complaint is rejected by the firm as being out of time, you can still refer your complaint to the Ombudsman if you think there are exceptional circumstances or that the time bar was wrongly applied, or otherwise unfair. Ultimately it is for the Ombudsman to consider what is fair and reasonable in the circumstances of the case.
Taking your complaint to court
If you cannot resolve your complaint with the firm and the Ombudsman cannot help, you may still be able to pursue your complaint through the courts. There are costs in doing this, and time limits for taking a claim to court. This is a complex area of law and the exact time limit will depend on what your claim is for and the particular facts of your case.
It is important that you do not delay if you are considering taking any action through the courts – seek legal advice as soon as possible.
Mortgage endowment compensation
If you have a valid complaint, you may be due compensation. The FSA has set out how this should be calculated.
How is compensation calculated?
The calculation of any compensation involves comparing:
_ the mortgage interest and endowment policy premiums you have actually paid and the current surrender value of your mortgage endowment policy; with
_ the mortgage interest and capital repayments you would have paid on an equivalent repayment mortgage, and how much capital you would have paid off the mortgage.
In some cases other factors need to be considered in the overall calculation, for example:
_ whether life assurance was needed;
_ whether the policy ran past your retirement date;
_ the type of endowment policy (for example, low start); or
_ the extent to which you could reasonably have avoided or reduced the loss by taking prompt action. This is also called mitigation.
No compensation is due if you are not worse off – for example, if your endowment policy has grown and is now worth more than the capital you would have paid off on an equivalent repayment mortgage.
I have been offered compensation. How do I know it is a fair offer?
When calculating mortgage endowment compensation, firms are required to follow guidance issued by the FSA. So, if the firm has offered compensation in accordance with our guidance, you can assume it is a fair offer.
However, if you have received an offer of compensation, but don’t understand how the firm calculated it, or you think there may be a mistake in the calculation, contact the firm and ask for a breakdown of the figures.
I have been offered compensation but it doesn’t amount to my shortfall; why is that?
The compensation is usually based on what your position would have been now, if you had not been sold the policy but had taken out a repayment mortgage instead. Compensation is not based on what you expected the policy to be worth.
What if I have already surrendered my endowment policy and changed to a repayment mortgage? How will the firm calculate compensation?
The calculation involves comparing:
_ the mortgage interest and endowment policy premiums you had actually paid, up to when you surrendered the policy, and the amount received when the policy was surrendered; with
_ the mortgage interest and capital repayments you would have paid on an equivalent repayment mortgage, and how much capital you would have paid off your mortgage, up to the point when you changed to a repayment mortgage.
Again, the precise calculation may vary if other factors need to be taken into account.
If you get compensation from making a complaint about the sale of your endowment policy, you should consider using it to reduce the amount you owe on your mortgage.
I changed to a repayment mortgage after receiving a reprojection letter but still have an endowment policy in place. The advising firm has agreed that I was mis-sold the policy but has only calculated compensation up to the date when I changed to a repayment mortgage. Is this correct?
Yes, because the endowment policy was originally taken out to repay your mortgage.
Therefore, the compensation is calculated up to the point when the endowment policy ceased to be used to repay your mortgage.
I have been offered compensation by the firm. If I take my complaint to the Financial Ombudsman Service, could the Ombudsman award more?
Firms and the Financial Ombudsman Service use the guidance issued by the FSA to decide how much compensation is due. Therefore, if the firm has offered compensation in line with our guidance, it is unlikely that the Ombudsman would require the firm to pay more unless, for example, the firm has made an error in its calculation, or new factors come to light which require the Ombudsman to use a different method of calculation.
If you have received an offer for compensation, but don’t understand how the firm calculated it, contact them and ask for a breakdown of the figures.
Do I have to pay tax on any compensation I receive?
Compensation is intended to put consumers back in the position they would have been in had they not received the ‘wrong’ advice. Where the calculation does not contain additional interest, tax will not be due on a compensation payment. However, in some cases (for example if the policy is sold, surrendered or varied) tax may be payable.
Consumers in this situation should not lose out, so our guidance to firms is that it may be appropriate for them to pay any personal tax liability that might arise (for example, following the surrender, sale or variation of the policy).
Where the circumstances of the case mean that the compensation calculation includes an amount of interest, you will usually have to pay tax on the interest in the normal way.
If you are not sure where you stand, or need help with calculating the amount of tax that
may be due, you should contact HM Revenue and Customs – see Useful contacts
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