Don't panic

If you have received an endowment shortfall letter, firstly don't panic.

The projected growth rates assumed in the letter are quite modest by historical standards. The shortfall may not happen.

But growth rates in the future may well be lower than in the past, because of low inflation, and the stock market has been poor.

So you won't necessarily have to take any action. But you may have to.

Start by printing off and reading two short FSA factsheets.

You are not alone

Millions of people have received these endowment shortfall letters.

The ombudsman receives 300 - 400 new complaints about endowment mis-selling each week.

On this site you can read the expressions of anger and bafflement from endowment holders.

If you need to go through the complaint process, the links on the left are designed to help you.

Be angry

This didn't happen by accident. Many people who took out endowment mortgages a while back are better off than they would have been with repayment mortgages, because the stock market did well then.

But companies continued to sell lots of endowment mortgages until very recently. Most of these recent endowments were probably mis-sold. This is because new products came on the market, and some mortgage technicalities changed. So endowments were no longer a good buy.

The Treasury Select Committee said in March 2004 that 80% of endowment holders face a shortfall of about £5,500, and 60% could have been victims of mis-selling. At least 8.5 million policies are still in force.

So what happens now? If your endowment mortgage has been missold to you, the Financial Services Authority wants you to be put in the position you would have been if you had been sold the right mortgage for you. additional compensation is rarely awarded and is usually small - this is disgraceful.

So why did they carry on selling endowment mortgages? Because the companies and the salesmen earned more commission from them than from other kinds of mortgages. See what the Financial Services Ombudsman said in June 2001.

The companies have to pay to put you in the position you should have been anyway. But no one seems to be actually punishing them. You would have thought punitive damages should be due to those whose trust they had abused by trying to swindle them. But no.

Well not yet anyway.

A reader writes

Firstly I would like to thank you sincerely for your excellent site. We received our notification letter 2 days ago telling us of a probable 30% shortfall at 6% on our mortgage. I have since been in touch with Claims and am waiting for their response. I am in a total panic, to be perfectly honest, and although we are professional people who will not be facing financial ruin through this, it may have an effect on, say, our plans for our child's education. Through reading the information on your site, however, it has become plain to us that we may well have a good case for mis-selling and we are going to follow your advice on complaining. It has made me feel very much less alone to be able to log onto your site, once again my thanks.

What next?

Visit our page about shortfall letters.