This is the fifth of the examples provided by the ombudsman, which we have listed here.

Endowment policy extending into retirement

A couple took out an endowment plan in 1988 to buy their council house. The mortgage was for £24,000 over a 20 year term. The policy, also for 20 years, would mature when the husband was 68.

When the couple complained in 2000, they said they had been unaware of the risks of an endowment policy, and had not been aware that they would still been making payments after the husband had retired. They also said they were given the impression that the policy was guaranteed to repay their mortgage when it matured.

The firm offered a lump sum which the couple could invest and which would then cover the premiums after retirement.

Complaint upheld. The ombudsman found no evidence to support the allegation that the endowment had been guaranteed to repay the mortgage. But the adviser did not seem to have considered whether they could afford the payments after retirement, and an endowment policy had not been appropriate for this couple, given their attitude to risk.

Amount of compensation

The couple could have afforded a repayment mortgage which would have been repaid by retirement.

The ombudsman calculated redress by looking at the amount of capital they would have paid off if they had taken a repayment mortgage with the shorter term. This was compared with the amount they could get by cashing in the policy.

The firm made up the difference to enable the couple to switch to a repayment mortgage and reduce its term so that it was cleared by retirement.