Example 1 |
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Capital shortfall and higher 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: |
£3,200 |
Capital repaid under equivalent repayment mortgage: |
£4,200 |
Surrender value less capital repaid: |
(£1,000) |
Cost of converting from endowment mortgage to repayment mortgage: |
(£200) |
Total outgoings to date |
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Equivalent repayment mortgage (capital + interest + DTA life cover): |
£21,950 |
Endowment mortgage (endowment premium + interest): |
£22,250 |
Difference in outgoings (repayment - endowment): |
(£300) |
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 and also because of the higher total outgoings to date of the endowment mortgage relative to the repayment mortgage. The two losses and the conversion cost are therefore added together in order to calculate the redress. |
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Redress |
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Loss from surrender value less capital repaid: |
(£1,000) |
Loss from total extra outgoings under endowment mortgage: |
(£300) |
Cost of converting to repayment mortgage: |
(£200) |
Total loss: |
(£1,500) |
Therefore total redress is: |
£1,500 |
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