Endowments

There are several types of endowments available - with profit endowments, Low start endowments and Unit-linked endowments.

With profit endowments are the most famous and were particularly with mortgage borrowers in the eighties, where providers promised to invest your home loan over a 25 year period. The aim was not only to pay off the amount you owe on your mortgage but to give you an extra lump sum when the plan matures.

It later transpired that thousands were mis-sold with-profits endowments. The plans earned huge commission for salespeople but were based on over-optimistic assumptions about stock market growth, and providers charged too little interest on monthly premiums to be able to pay off the mortgage. In the end, endowment companies were forced to tell policyholders that the plan would not completely repay their home loans when it matured.

With-profits endowments that have relied have subsequently fallen out of popularity, partly because their reputation was severely damaged by the mis-selling scandal. Most of the firms selling these policies no longer offer them or have been swallowed up by larger companies.

If you have an endowment policy, there are three options; stick with the plan, surrender it or stop contributing and leave it until it matures.

But all policyholders should check whether they have been mis-sold an endowment policy and complain to the Financial Ombudsman. Your claim may be upheld as long as you complain within three years of realising there was a problem and you think you were misled over guaranteed gains, told the plan was risk-free, or told you had to buy an endowment to get a mortgage.