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."

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory