ENDOWMENT SHORTFALL CLAIM

The Financial Services Authority (FSA) is an independent body set up by statute to regulate the financial services industry. The scandal relating to endowment shortfall is just one of the many matters they have been required to deal with and rules have been established to ensure that those who have been unfairly treated by financial advisers are entitled to receive recompense for their losses. Insurance companies are now required to advise their clients of the value of their fund every two years and a system of coloured ‘re-projection letters’ has been initiated. Re-projection letters are coloured red, amber or green and are intended to indicate the status of the fund at the time the letter was sent out. The status of the fund can change with time and just because the fund is on target now does not mean that it will necessarily be on target in the future.

Re-projection letters coloured red, amber or green are required under FSA regulations to be sent out by the insurance companies at no greater interval than every two years outlining the anticipated value of the fund at maturity :-

A green letter means that the fund is on target and there is no cause for concern at the time the letter was sent out.

An amber letter means that whilst the fund is on target at the time the letter was sent out there are some concerns that future issues may prevent the target figure from being achieved.

A red letter indicates that the fund is in deficit and will almost certainly not achieve its target value resulting in an endowment shortfall. Receipt of this letter triggers the right to claim compensation in appropriate circumstances.

A claim for compensation can only be initiated to an insurance company following receipt of a red re-projection letter which indicates that there is an anticipated deficit. A formal endowment shortfall complaint must be made in writing within three years of receipt of a red letter or the potential claim will become time barred and the opportunity to claim may be lost forever. A very small proportion of insurance companies pay no heed to the limitation period and will still settle compensation even though the three year period may have expired.

Insurance companies must respond to an initial letter of complaint in a timely manner. If the insurance company refuses to settle or makes an inadequate offer then an application can be made to the Financial Services Ombudsman (FSO) whose decision is binding on the insurance company but not on the applicant who can refute the finding of the FSO and thereafter issue legal proceedings for compensation in a court of law.

If the seller of the insurance policy becomes bankrupt by the time of the decision by the FSO then in certain circumstances an application for compensation can be made to the Financial Services Compensation Scheme which is a fund of last resort.

If you would like free advice either complete and send the contact form or call the helpline and an expert adviser will discuss your potential no win no fee compensation claim at no cost to you. If after discussing your claim with us you wish to take the matter no further then you are under no obligation to do so and you will not be charged for our initial advice.