(no subject)

[ewx]

When your house is on the line you assume that the guarantees on offer are copper bottomed.

...without actually having seen the T&Cs this man was shown, I'd suggest that the more you have to lose, the less you should be assuming. Certainly the notion that the stock market can fall as well as rise should not have been unfamiliar in 1987. When does a large number of people losing a bet stop being a reminder of caveat emptor and start being a scandal?

My wife and I are going to have to work until normal retirement age and perhaps even a little beyond.

I'm finding it a little hard to be very sympathetic about this. Retiring earlier than 'normal' is surely a bonus, not a right, and not one that I think my own generation are very likely to enjoy in large numbers, if current demographic trends continue.

Comments

[beingjdc.livejournal.com]

So in 1996 he bought a house for £125,000, with a £65,000 mortgage. There will be a £20,000 shortfall. On house price inflation trends it's probably worth about £225,000 now, so he'll have £205,000 in equity at the end of the day.

Being retired, they won't need a big house, so he could have this (http://www.vebra.com/home/includes/vdetails.asp?src=vebra&fd=0&bd=1&db=1&cl=175&pid=8662502) lovely retirement bungalow down the road, with a spare £100k to invest in getting a better pension.

Some people...

[hsenag.livejournal.com]

Unfortunately their house suffers from subsidence and is worth less than they paid for it (mentioned at the bottom of the article).

[beingjdc.livejournal.com]

Ah, so they not only didn't read the terms of their endowment properly, but also not the terms of their insurance, or their surveyors' report?

[addedentry.livejournal.com]

But if they moved to a less valuable house, they wouldn't be able to boast whinge about their council tax.

[beingjdc.livejournal.com]

Another advantage!

[simonb.livejournal.com]

From what I've seen this is the tip of the endowment iceberg; a lot of people took out endowment mortages (for those that don't know they work by you paying off the interest on the capital and putting a set amount into a long term capital bond which matures when the mortage is due, the idea was that they would be easily able to pay off the mortage and potentially have money left over at the end) are going to be bitten hard due to the crash in the UK life insurance market.

Personally I took one look at endowment mortages and ran screaming away from it; repayment mortages make more sense to me - after all the stock market can go down as well as up - and you end up paying about the same each month anyway.

[bellinghman.livejournal.com]

personally I took one look at endowment mortages and ran screaming away from it

So did I - various people were telling me to take out an endowment mortgage in '88, when I moved out and into my own place. I just didn't like the idea at all: it relies on a pair of long term exponentials meeting and cancelling out at the twenty year point. Sod that for a game of soldiers - it's easier to hold a fishing rod in each hand and try to use them as chopsticks.

Not that I was that happy anyway a few years later, when I had negative equity and the Tories were taking interest rates through the 15% mark, but I survived.

[mobbsy.livejournal.com]

Turning over control of interest rates to the BoE with the goal of controlling inflation seems to be one of the best things Labour have done.

[rmc28]

If anything we're going to have work beyond 65. I wouldn't be surprised if they soon stop women 'normally' retiring at 60. Mind you, seeing what my mother is like at 56, I can't see the point of forcing her to retire in the next decade or two.

[addedentry.livejournal.com]

What's the point of forcing anyone to retire at a fixed age?

[ewx.livejournal.com]

How do you choose when to start paying someone a state pension?

[arnhem.livejournal.com]

Start paying it to everyone at age zero and get rid of child benefit (tax relief/whatever), unemployment benefit, income support, disability benefit, old age pension?

[angoel.livejournal.com]

They already have, some years ago. It'll phase in between 2007 and 2012 (if I remember correctly, which I almost certainly don't).

[bellinghwoman.livejournal.com]

Not quite :-)The following link explains it all:
http://www.nasuwt.org.uk/Templates/Internal.asp?NodeID=43089
scroll to the bottom of the page and there's a link to a pdf called Basic State Pension Retirement Age.

I've had a quick look through and it spoiled my day, as I discovered that I have to work two year longer than I thought :-(

[marnameow.livejournal.com]

Endowment mortgages were sld as the 'best thing EVAH' for for bit - and recommended and pushed by financial advisors and mortgage brokers. Whom people trusted because they were paying them to find the best deal.

[ewx.livejournal.com]

"If it sounds to good to be true..."

[mobbsy.livejournal.com]

It seems to have worked out for my parents, who got in early enough. I wasn't going to touch one though, I was actually somewhat surprised that they were still being offered.

[bopeepsheep.livejournal.com]

It should (touching wood crossing fingers) also work out for my parents, who have single-digit years to go on theirs. Any shortfall could be covered by the increase in value of the house (profit in comfortable 6 figures is likely, thanks to insane Oxfordshire house prices, should they decide to move). But my dad is also a Maxwell pensioner (ok, he will be) so has absolutely no retirement income in prospect. :-(

I am very very glad they chose to get their endowment when they did, and am hoping that nothing goes wrong when they come to redeem it. The idea of keeping them as well as us does not appeal.

[marnameow.livejournal.com]

Sure, but if the trusted professional telling you about it claims it's a very good thing, and you yourself don't feel confident about your ability to judge such things? Not so easy.

I did all the mortgage research myself, and figured out what I thought we needed. But in the world before internet, that would have been a hell of a lot harder to do, and I would probably have had to go to someone and say 'explain it all to me'.

[ewx.livejournal.com]

Perhaps I'm above-averagely sceptical of "trusted professionals"; but then, surely the notion that such people (not just financial advisers, but doctors, politicians, the lot) get it wrong from time to time (whether through error or greed) is not one that's new since the late 80s.

In this case the obvious question to ask the adviser would have been "what if the stock market goes down instead of up?" If the answer is "then you're in a hole" then you are now aware of the risk; if the answer is "that won't happen" then you say "1929" and find a new adviser. (And even if the buyer was so ignorant to have never heard of any stock market falls before taking out the endowment policy, it seems to me that they can hardly claim ignorance of the 1987 crash when buying that house in 1996.)

Anyway ... like I said I've not seen the T&Cs that the person quoted in the report saw - perhaps there was indeed some kind of black and white guarantee which cannot in fact be cashed in now that it's all gone pear-shaped, but it doesn't seem very likely - but I do find it a bit hard to believe that he managed to remain entirely ignorant of the risk.

And that's the key point, to my mind; if he really, really didn't know what he was doing, then there may be a case for some kind of compensation from the state. (But then, we don't compensate people for losing at roulette because they don't know the rules...). If he did, and just lost the bet, then really he should suffer the loss himself.

[nslm.livejournal.com]

Don't forget that people were often not told much about the downsides of such policies. Some of the larger companies were *really* pushing endowment policies.

If you trusted the guys that were selling them to you, you wouldn't look much further.

If you trusted the guys that were selling them to you, you wouldn't look much further

[ewx.livejournal.com]

I've got this bridge for sale...

[gerald_duck]

Shrug. I got an endowment policy in 1998, when people were saying not to touch them with a bargepole. Yes, the stock market's not done especially well since then, but with low interest rates it's not so hard for the endowment policy to keep up with them. Also, fund management fees are lower now, and the projections I got in 1998 were obviously pretty cautious!

At the moment, the endowment is performing only a shade worse than the equivalent repayment mortgage would have. With just a little luck there'll be an economic upturn sometime in the next 15 years and I'll end up modestly ahead. If I'm very lucky the economy will do stormingly well, and I'll be used as a success story when they want to dupe the next round of suckers into buying endowments just before a stock market crash.

If I'm wrong, I just extend the mortgage by a year or two. Or even put the shortfall on a 0%-interest-for-six-months credit card. (-8

I don't think this stuff is quite as black and white as journalists like to pretend.