Example 2 |
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Capital shortfall partially offset by lower endowment mortgage outgoings |
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Background |
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Capital sum of £50,000 |
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25 year endowment policy |
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Duration to date: 5 years |
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Established facts |
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Endowment surrender value: |
£2,500 |
Capital repaid under equivalent repayment mortgage |
£4,200 |
Surrender value less capital repaid under equivalent repayment mortgage: |
(£1,700) |
Cost of converting from endowment mortgage to repayment mortgage |
(£300) |
Total outgoings to date: |
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Repayment mortgage (capital + interest + DTA life cover): |
£21,950 |
Endowment mortgage (endowment premium + interest): |
£21,350 |
Difference in outgoings (repayment - endowment): |
£600 |
Basis of Compensation |
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In this example, the complainant has suffered loss because the surrender value of the endowment is less than the capital repaid but has gained form the lower outgoings of the endowment mortgage to date. In calculating the redress the gain may be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to take account of the gain. |
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Redress if it is not unreasonable to take account of the whole of the gain from lower outgoings |
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Loss from surrender value less capital repaid: |
(£1,700) |
Gain from total lower outgoings under endowment mortgage: |
£600 |
Cost of converting to repayment mortgage: |
(£300) |
Net loss: |
(£1,400) |
Therefore total redress is: |
£1,400 |
Redress if it is unreasonable to take account of gain from lower outgoings |
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Loss from surrender value less capital repaid: |
(£1,700) |
Gain from total lower outgoings under endowment mortgage: |
Ignored* |
Cost of converting to repayment mortgage: |
(£300) |
Net loss taken into account: |
(£2,000) |
Therefore total redress is: |
£2,000 |
* In this example, and also in Examples 3, 7, 8 and 9, the complainant's circumstances are assumed to be such as to make it unreasonable to take account of any of the gain from lower outgoings. |
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