Endowments policies were often sold by financial advisers to homeowners and homebuyers who were promised a return on their investment in the next twenty five years. Over these years the homeowners would be able to repay their mortgages and earn a sufficient amount in the process.
Homeowners usually paid around fifty pounds a month throughout the 80s and 90s and were promised a significant payout in the years to come, given the unpredictability of the financial market the supposed payouts are significantly lower than the initial projections.
Those who paid £50 per month were promised around £100,000 but long-term savings and investment company Standard Life predict that the amount is likely to be a measly £25,000 for this kind of investment.
Insurers place the blame on shares, bonds and inflation as interests rates have lowered over the years, insurers still insist that these savers had faired better than they would have investing their money in a building society. Experts suggest that this idea is simply untrue.
Many have been left wondering where exactly their investment has gone, the simple answer is that the sellers of these endowments usually pocket a high amount of the investment (around 120% in the first year).
If a home buyer took out a policy of £50 a month the salesperson could earn over £700, savers were often charged a monthly policy fee too that escalated with the rising inflation, these fees were pocketed by stockbrokers and investment banks.
Were the policies mis-sold?
In the early 2000s endowment companies were forced to pay out overall sums of around £2.5 billion in compensation after receiving such a high number of complaints from the public, indicating that they had been mis-sold these policies and mis-informed about the returns.
Many are now questioning the nature of these so called endowment policies and wondering whether they are entitled to compensation.