Financial Services Compensation Scheme  

FSCS pays out on mortgage endowment claims against adviser

FSCS pays out on mortgage endowment claims against adviser

Another advice firm has defaulted with the Financial Services Compensation Scheme after landing itself in hot water over a mortgage endowment policy. 

The lifeboat body has received three claims against Marshall James & Company Financial Management Services, a Birmingham-based adviser which defaulted with the scheme on May 20. 

It has already paid a mortgage endowment claim for £6,500 against the advice firm, and with at least another claim in process the bill is set to grow.

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But the FSCS also rejected an unsuccessful claim in relation to a self-invested personal pension. 

Mortgage endowments were pushed in huge volumes in the 1970s through to the 1990s alongside interest-only mortgages, and resulted in a most notorious mis-selling scandal. 

The policy is a mixture of an investment and insurance policy, providing both life assurance and savings, which is designed to repay a mortgage.

The consumer only pays interest on the mortgage each month, and also pays monthly into the mortgage endowment, which is then used to pay off the mortgage.

If initial growth predictions were realised the mortgage should have been paid off by the term end, possibly with an additional lump sum for the individual. But projections were often too ambitious and regulators at the time set very different guidelines for yield assumptions on the mortgages than they did later on.

Earlier this year another advice firm, Hector McLean Financial Consultants, found itself in default with the FSCS after receiving claims against failed endowment policies.

On its website the FSCS details certain criteria which could lead to a successful claim against a mis-sold mortgage endowment policy, including if an adviser did not fully explain the policy’s link to the stock market.

This link created a main risk that at the end of its term the policy could leave the client with a shortfall for paying their mortgage. 

Time limits apply to mortgage endowment claims, with consumers expected to make a request for compensation six years after they were sold the policy or three years from the date it became apparent they had cause for complaint. 

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