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FSA eyes firm claiming to solve endowment crisis

The FSA is understood to be closely monitoring a company which claims it

can solve the endowment shortfall crisis.

Mortgages Paid for Sure launches this week, arousing fears from both the

regulator and lenders because the venture is not underwritten by any bank

or life office.

The Midlands-based firm is offering endowment policyholders the chance to

pay a one-off £175 fee to guarantee any shortfalls will be paid. If

policies pay out a surplus, MPFS takes a 25 per cent cut.

But suspicion about the firm is rife as it relies only on a reserve fund

stumped up by its five directors, which will be topped-up from the

registration fee.

The reserve fund is also dependent on individuals surrendering their

policies, which incurs a penalty of 10 per cent of the surrender value.

This flies in the face of received wisdom on best advice for endowments

which recommends policies should not be surrendered.

FSA spokeswoman Sarah Modlock says: “The sort of business they are running

requires some sort of financial backing under the Insurance Companies Act.”


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