Savings endowments

How we resolve savings endowment complaints

• The customer was wrongly advised

  Sometimes, the customer complains about the amount the policy has returned, but the more significant issue is the suitability of the plan. So we’ll start by checking that the policy was suited to the customer's needs.

  Many customers who’ve taken out endowment plans will be considered ‘low risk’, but they should have been classed as ‘risk averse’.

  We’ll also consider what the customer might have done with their money if they hadn’t taken out the savings plan. If we’re satisfied the policy wasn’t suitable as a general savings vehicle for the customer, we’re likely to uphold the complaint.

  Special rules apply to plans sold by independent financial advisers. So we consider the individual circumstances for each of these.

• Execution-only sales

  If we believe your customer did, or should have, understood that the sale was execution only, we’re unlikely to uphold the complaint. But we still need to be confident that your customer made an informed decision.

  In these cases, we'll want to look at sales and marketing material, such as mailshots and illustrations to check the information provided was clear, fair and wasn't misleading.

  All marketing materials must present balanced information. The sale will be in question if the execution was based on inadequate or misleading information.

  Read more about how we assess the suitability of an investment.

• Reduction in yield

  In complaints about 'reduction in yield', we’d expect you to provide or recreate an illustration from the point of sale. This is to show the projected return of the plan after the cost of life cover and any charges have been applied.

  If you can't provide an illustration, we may ask you for information about the costs of the plan. We’ll take these costs into account, along with other relevant information, to see if we think the plan offered a realistic prospect of a reasonable return.

  If the illustration showed the return would be less or only slightly more than the amount to be paid into the plan, we’ll look at whether the customer understood this when they took out the plan. If your firm didn't discuss this with the customer, we’re unlikely to agree that it was clear, even if it was shown on an illustration.

  Customers are unlikely to choose an investment if they know they’ll be getting back less than they paid in. If we believe your firm didn't make this clear to the customer, we’re likely to say the plan was unsuitable.

  We’ll consider any reasons why someone would choose to invest in a plan that would return less than if they’d kept their money in the bank – assuming reasonable growth. And we’ll decide if the customer had lost out financially by taking out the plan.

  Because the plan proceeds are paid to the customer without any tax liability, we’ll look at the total return to the customer. That means it might be appropriate to look at the gross return received. This is relevant when the customer is a higher-rate taxpayer.

• Charges, such as the cost of life cover, were too high

  Sometimes charges, such as the cost of life cover, affect the final return on the savings endowment. And charges tend to be higher for older customers.

  In some cases, the deduction might make a significant difference to the return when the customer didn't even need life cover. So, we’ll check carefully whether the customer did need life assurance, by looking closely at what was discussed when they took out the plan.

  If we think the customer needed life cover, we’ll work what percentage of the premium it was. We may still uphold a complaint even if this percentage is very small.

  It may be the cost of the life assurance is not to blame for the low returns. If so, we’ll look at other charges on the savings endowment and whether they made the plan unsuitable.

• Premiums collected by an agent

  Your firm may operate 'industrial branch sales' – where an agent regularly collects the premiums for the policy from a customer's home.

  To resolve these cases, we’ll need to carefully consider what the customer understood at the time they bought the savings endowment policy. If the agent was selling door to door – and the plan is different to the one sold in your branch or from your office – this is especially true.