The PIA has announced that homeowners who were sold an endowment mortgage without being warned of the risks may be entitled to compensation.
PIA ombudsman Tony Holland said: “If they have not been explained to homeowners there may have been a mis-sale which could give rise to compensation – that is recovery of the premiums paid plus interest.”
Just days before the PIA announcement, a report by the Institute of Actuaries (IoA) said endowments that run for 15 years or less were unlikely to be good value.
Ray Milne, deputy chairman of the IoA public relations committee, said: “Due to a combination of factors, endowment mortgages are not likely to work out in the short term. In the long term they will only work out if competitive charges are introduced.”
Would-be endowment holders are being warned to make sure that they receive proper advice before taking on such a policy.
“We would not necessarily say independent advice is better than direct advice, but consumers should be aware that if they go to a tied agent then they may not be offered the best product available.
“What you have to bear in mind is that there are thousands of policyholders receiving sums in excess of what they thought their endowment would be worth.”
Milne added that he hoped life offices would react by reducing the cost and charges of endowment policies so they would once again “regain their popularity”.
The Trade and Industry Secretary, Stephen Byers, added fuel to the fire suggesting an investigation could be launched into endowment mortgages, which has the potential to be as large as the inquiry into pensions mis-selling.
