Fair Investment: Majority of endowment policy holders left with shortfall

14 August 2008

Up to 87 per cent of endowment policy holders believe the policies were mis-sold to them, according to a new study by Fair Investment.

The financial information service found the majority of those who agreed to the policies – which were seen as a way to repay interest-only mortgages while keeping a lump sum – may now face a shortfall.

This situation could lead to debt problems for many who are not entitled to compensation, which may be awarded if the risks were not explained at the time it was taken out.

According to the study, nearly half (47 per cent) of endowment policy holders questioned said they had been guaranteed a policy that would cover their mortgages.

Furthermore, an additional 27 per cent said risks were not made clear when they agreed to the policy.

Chartered financial planner at the organisation Sharon Bratley said people had taken out policies "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."

Also in property finance news this week, Abbey has found 1.6 million homeowners are considering renting out a room to raise extra cash.

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Gregory Pennington are founder members of DEMSA (Debt Managers Standards Association).

DEMSA are the first trade body within the finance industry to successfully secure approval for its code of practice under the OFT Consumer Codes Approval Scheme (CCAS).