Financial watchdog defends endowments

HOWARD DAVIES, chairman of the Financial Services Authority, has dismissed claims of systematic mis-selling of endowment mortgages and panned their critics as ill-informed.

Speaking in an interview last week, Mr Davies said the overwhelming majority of endowment policies, which are linked to the performance of financial markets, pay out adequately. Any ban "was absolutely out of the question", he said.

Over the past few weeks, there have been calls from consumer groups and MPs for endowment mortgages to be scrapped. They claim endowments have been systematically mis-sold since 1988, with commission-hungry salesman misleading borrowers about "guaranteed" returns. Critics have accused the policies - which accounted for around a third of all mortgages sold this year - of being inflexible, of carrying relatively high charges and of underperforming, leaving borrowers unable to pay off loans. The FSA, which regulates financial products, is carrying out checks on past selling techniques. But those calling for a full-scale government inquiry and regulatory action are misinformed, Mr Davies said.

"I find it very frustrating when people are quite happy to pontificate but without being at first base in terms of what the reality is," he said. "They do not seem to look at the numbers. There are just basic facts that you might like to come to know which never seem to appear in the debate. It is just on the level of everything is awful or fine. It is a lack of analysis."

Mr Davies said only half the 600,000 endowment policies sold annually are attached to mortgages and that "the overwhelming majority of these policies pay out adequately".

He added that the number of borrowers taking out these policies has plummeted in recent years. Endowments accounted for 32 per cent of mortgages in the first three months of 199 from a peak of 83 per cent in 1983, according to the Council of Mortgage Lenders.

The mortgage lending industry has applauded Mr Davies's stance and is calling for holders of endowment policies to take advice before ditching the products. Standard Life and Norwich Union have provided endowments for Halifax, the UK's biggest mortgage lender, since 1988. Halifax said it has been advised by the life insurers that no endowments taken out over the past 10 years have had performance problems.

It said it has seen no evidence of mis-selling, and believes there is still a valid place in the market for these type of policies.

The Association of British Insurers backed the point of view. "Endowments are designed for a job of work," a spokeswoman said. "They are a reasonably low-risk investment product with built-in life cover for a fixed period. Provided that is how they are used, they seem to work well."

News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
peopleReports that Brand could stand for Mayor on an 'anti-politics' ticket
News
The clocks go forward an hour at 1am on Sunday 30 March
news
Arts and Entertainment
The Doctor finds himself in a forest version of London in Doctor Who episode 'In the Forest of the Night'
TVReview: Is the Doctor ever going stop frowning? Apparently not.
News
Voluminous silk drawers were worn by Queen Victoria
newsThe silk underwear is part of a growing trade in celebrity smalls
PROMOTED VIDEO
Sport
footballMatch report: Real fight back to ruin Argentinian's debut
News
Candidates with surnames that start with an A have an electoral advantage
newsVoters are biased towards names with letters near start of alphabet
Arts and Entertainment
Isis with Lord Grantham (Hugh Bonneville)
TV
Arts and Entertainment
Jay James
TVReview: Performances were stale and cheesier than a chunk of Blue Stilton left out for a month
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?