Savings endowments

What we look at

The main purpose of a savings policy is to save for the future and achieve a positive return.

When we look at a complaint, we’ll decide whether the savings plan was a worthwhile investment. We’ll also look at whether the policy was suitable for you in the first place.

• Suitability of endowments

  If you complain to us about the amount the policy has returned, the first thing we’ll check is how suitable the policy is for your needs. This is an important factor that we’ll need to consider.

  If you got advice about your policy from an adviser, we’ll assess what you discussed with that adviser. We’ll also look at what was said about how much risk you wanted to take and whether the policy matched this.

  Another thing we take into account is what you would have done with your money if hadn’t taken out the savings plan.

  If we’re satisfied the policy wasn’t suitable as a general savings plan, we’re likely to uphold the complaint.
  

• Execution-only sales

  Buying a plan without any advice given is known as an 'execution-only' sale. If we believe that you understood, or should have understood, this, then it's unlikely that we'd uphold your complaint.

  You may have bought a plan after getting a mailshot or illustration explaining the sale. We would look to see if the information was clear, fair and not misleading. We'd want to see that you were able to make an informed choice about the sale of the plan. If we don't think you were able to make an informed choice, we'll question if the sale had enough information on it or if it was misleading.

  Read more about we assess the suitability of an investment. 

• Reduction in yield

  A reduction in yield is the difference between the projected return on a plan and the amount after costs.

  When we look at a complaint about this, we'll ask the business to give us an example from the point of sale. This should show us the projected return on the plan after life cover costs and any other charges.

  We take into account plus any other relevant information. We want to make sure the plan gave you a realistic prospect of a reasonable return.

  If the example shows a smaller (or slightly bigger) return than what you paid, we'd look to see if this was made clear to you.

  If it wasn't made clear, we'd argue that you wouldn't have chosen an investment where you'd get less back than you paid in. We'll then decide if you've been financially disadvantaged by taking out the plan.

• The effects of charges and deductions on your return

  Saving plans like endowment saving policies can have charges and deductions. These can have an impact on whether the plan will make you a worthwhile return.

  A common problem we see if the effect of charges like life cover on the final return. These costs could show the chance you had of getting back a good return, unless the fund grew above any reasonable estimate.

The need for life cover

Life cover is included to make sure the policy meets the qualifying rules – but the amount is usually very low.

In some cases, the deduction might make a large difference to the return you get, even though you don’t need the cover. So we’ll carefully check if you actually needed the life assurance.

The cost of the life cover can vary substantially, depending on how old you were when the plan started. If we decide that you needed it, we’ll work out the actual cost of the life cover as a percentage of the premium. We may still uphold a complaint even this percentage is very small.

If the reduction in yield is large but isn’t caused by the cost of life assurance, then we’ll look at what other charges could be causing it and if they make the plan unsuitable.

Industrial branch sales

This type of sale means that the premiums you pay are collected from your home by an agent.

Because of the cost of collection, this can mean that the charges are higher. This is compared to policies where premiums are paid from a bank account.

When we consider a complaint, we'll look at whether you understood this when you took out a plan. This is important, especially if the agent was selling door-to-door and we find the plan is different to the one sold in branch.

Older customers

Charges tend to be higher if you’re older, usually because a greater deduction is made for the cost of life assurance.

Although your age alone isn’t evidence that a plan was unsuitable, we’ll look closely at what the business explained to you at the beginning.