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Public don&#39t get a balanced view

The real problem with the endowment review (IFAs slam “scaremonger” FSA

over endowments, MM, July 5) is not what the FSA says in its factsheet but

how the media interprets it. That is how most customers will get their

opinions on the subject.

Media comment is a real problem. Last week, a reporter on Today on Radio 4

said the fact that 70 per cent of policy-holders had not yet taken any

action was very worrying and went on to suggest that, in a few years, this

could turn into the worst repossessions&#39 crisis ever.

This is arrant nonsense. For most people at this stage, doing nothing is

precisely the right option.

First, it would require only a relatively small improvement on the assumed

investment returns for the putative shortfalls to disappear.

Second, if the shortfalls are realised, the policyholders will still be

sitting on an asset whose value is likely to be quite large in relation to

the shortfall and would have several options to cover it. For example, from

other savings, from part of a pension commutation or from a planned move to

a smaller house after the children have left the nest.

There is scarcely a lender in the country who would not extend the

mortgage for a few years on a repayment basis to cover any shortfall,

especially if the endowment was recom-mended or provided by the lender in

the first place.

There is also a degree of naivety in the implicit assumption that most

policyholders would take any action now. The insurers are, in effect,

writing to customers to tell them that the endowment policy their adviser

described to them with such confidence a few years ago has not been such a

good investment but that one way around this difficulty would be to put

even more money into the same policy. Good sales line.

If you look at it from the customer&#39s perspective, then the survey

findings are neither surprising nor particularly worrying. But, of course,

neither the regulator nor the insurers see it this way. They regard the

review itself as just another product and process to be executed rather

than as a benefit tailored to customers&#39 real needs.

I am not sure whether the Radio 4 report was uninformed journalism or

deliberate sensationalism but either way it did little to help its

listeners gain the balanced perspective that they need.

Malcolm Oliver

The Oliver Small Partnership,

North Berwick

East Lothian

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