By Adrian Cammidge
IFAs have slammed Legal & General over its "bizarre" decision to credit score loans made against with-profit endowment policies.
The move follows the life office's transferral of the running of policy loans to its banking subsidiary.
Policy loans enable policyholders to borrow a percentage of a plan's surrender value. Loans are guaranteed as they are secured against surrender values.
L&G, which has over 1m endowment customers, claims it has taken the step as part of a duty of care to customers. Spokesperson John Morgan says the move will ensure policyholders meet their commitments.
He says: "It's in the interest of the customer that when a loan is made, its is made prudently as the alternative is pawn broking."
But Dowry senior financial adviser Norman Kilby says: "If you get a bad credit rating you don't get your loan. It's ridiculous as it's a no risk situation with the loan repaid on the maturity of the policy."
London & Country Mortgages managing director Phillip Cartwright says: "I find it a little bizarre why they feel they need to do this. If a customer was in arrears on their endowment payments I could understand it but if they are up to date there should be no need for concern."
L&G says it will honour loans where an agreement to loans was part of the policy.