When I took over as the editor of Daily Mail’s Money Mail section in 1999 there was one issue I was determined to confront: mortgage endowments.
I was convinced the industry was hiding a dark secret. Why were so many insurers refusing to publish how much they were paying? Was it possible the outcomes for investors were not as rosy as they claimed?
If so, what would be the consequences for the millions who had been flogged them as the ideal way to repay a mortgage and provide a tasty lump sum on top?
At that time I was attacked by the industry and, along with others who took the same stance, I was subjected to foul-mouthed rants and threats from some financial salesmen.
The chief regulator mocked us at a mortgage industry lunch, likening the scandal to having a burglar break into your home and leave a bag of money.
Well the chickens have come home to roost. Borrowers who were duped by the slick-tongued promises are in many cases receiving a quarter of the payout they might have expected.
Money Mail has published shocking figures showing how payouts have collapsed. Standard Life, once the endowment flag-bearer, would have paid £110,399 on a benchmark 25-year, £50-a-month endowment in 1992. Today it will pay £23,814 – that is 78.4 per cent less.
General Accident, another regularly at the top of the tables, paid £110,093 in 1992. Now it pays £27,670.
What is worse, insurers have fallen back on their old habits of refusing to publish how much they are paying. And, scandalously, many are refusing to say how many investors are facing a shortfall because under the new Solvency II rules they do not have to. Once again the regulator appears to have fallen asleep on the job.
Where has the money gone?
We might be in a low interest rate environment, but endowments were supposed to smooth returns over 25 years.
The stock market is trading close to record highs. There might have been a couple of corrections in that period, but dividend income has remained solid. Property and bonds returns have been decent.
It seems that those who were advised to stick with their endowment were often just being encouraged to throw good money after bad. Dreadful management, poor investment decisions and high charges have made a mockery of their 25 years of investing.
Once tax incentives were removed in 1984, these investments should never have been linked to mortgage loans. Greed among insurers and their lackey salesmen was the motive.
Twenty-five years on their victims, let down by the regulator, are still paying the price.
Regulator gets tough
The Pensions Regulator has been flexing its muscles issuing more penalty notices to employers who failed to meet their auto-enrolment duties.
The 753 employers who are not paying contributions represent less than 0.1 per cent of the total. We can hope some of this is ignorance rather than wilful disobedience.