Leading IFAs are calling for the FSA to tighten the rules on the
methods used by providers to calculate mortgage endowment statements,
claiming the current array of methods are resulting in consumer
confusion.
Informed Choice managing director Nick Bamford is warning that some
product providers such as Standard Life are reducing the value of
clients' policies by applying a market value reduction and then
projecting forward from this figure.
He says that because the MVR does not apply at maturity, it creates
an immediate and unnecessary shortfall dragging down the value of the
policy.
The FSA says it does not prescribe a basis for statements as
providers are not obligated to provide them as they form part of an
existing contract and are not part of the point of sale.
Bamford says: “I can see why providers think it is best to warn
clients now but the MVR will not apply at mat-urity. Talk about let's
create a problem where there might not be one. Common sense says the
FSA should prescribe the illustration basis and it should not include
the MVR.”
Charcol financial planning director Roderic Rennison says: “All life
insurers calculate in different ways but I am not sure how aware IFAs
are of this. Bamford's concerns serve to highlight the value of a
good IFA to help customers understand the value of their policy.”
Standard Life marketing manager Andrew Black says: “We calculate our
illustrations based on FSA guidelines. We base them on the surrender
value of the policy which would include the MVR. This is an
illustration and the policy will work out at around these figures, it
will not be spot-on.”
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