Questions of Cash: A shocking performance for endowment holder

Q: In 1985 and 1989 I took out endowment plans with Lincoln Financial Group, via a broker, to cover my mortgage. I have just received warning letters which suggest I will obtain little return beyond my premium payments. The 1985 policy was targeted to achieve £40,500 over 25 years, but on current projections will pay only £21,600 against premiums of £18,054. My other policy should have produced £10,000 over 25 years on premiums of £4,776, but is now projected to pay only £5,480. Is this a case of extreme mis-selling? ML, York.

A: It's under-performance on an astonishing scale. Your policies are unit-linked and the shortfall may reflect the high charges connected with these products. One broker suggests that Lincoln's charges were above average. Lincoln said that it could not discuss your individual case, which it is now investigating, and given the complexity of fund management charges and the cost of life cover, it was unable to provide any figures for charges. It did agree that the poor current projections were probably related to the charging structure, with a high proportion of charges levied in the endowments' early years. Lincoln is currently working with the Financial Services Authority (FSA) to investigate alleged mis-selling of endowment-type savings products by its former tied agents, City Financial Partners Ltd (CFPL), but not of endowments. You may have grounds for claiming that you were wrongly advised to choose Lincoln products given the apparent size of its charges: you might pursue a claim for mis-selling on this basis. The FSA tells us that it has no powers to investigate poor fund performance and will not therefore be taking this matter up with Lincoln. But the scale of the problem here appears to go beyond simply a matter of poor returns, given that it covers a period in which stock markets generally performed extremely well. We would be pleased to hear from other readers with Lincoln Financial Group products to take this matter further.

Q: I have a personal pension with Equitable Life and some months ago I switched from a money purchase scheme to an index-linked scheme. I used to check the Halifax Investment Management funds – as they were called after the (partial) takeover of Equitable Life by Halifax – in the managed funds section of your Saturday paper. In October, these funds ceased to be listed and I have not been able to find out anything about them despite phoning Halifax investment managers. Why are they no longer listed? SB, by e-mail.

A: You are correct that all unit-linked Equitable funds are now under the Halifax name. The Independent's performance figures are provided by Standard & Poor's. A misunderstanding between S&P and Halifax led to these funds being excluded after they were converted to OEICS (open-ended investment companies) in September last year. It is hoped that the performance figures will again be included in the near future. In the meantime, the information is available from Halifax branches, Halifax advisers and the Equitable helpline number, 0870 9010052.

Q: Last year you published a letter from a teacher who believed he had been mis-sold FSAVCs (Free-Standing Additional Voluntary Contributions to pensions), and you recovered contributions for him. Following this, I applied to Royal Scottish Assurance for mis-selling of my FSAVC, which I paid into from 1992 to 1995. After investigation and comparison with the teacher's pension scheme's in-house AVC, they have offered to make up the difference and informed me I can transfer funds to the in-house AVC without incurring early transfer penalties, provided I do this within six months. I have not been offered the option of recovering my contributions. I would prefer a refund as my contributions will probably purchase an annuity worth only about £500 per annum. AM, by e-mail.

A: Tax rules prevent you being refunded your contributions. Carl Melvin of the adviser Pension Transfer Solutions says: "The reader was eligible to pay into the FSAVC scheme and received tax relief on contributions made. The fact that she should have paid into the AVC does not alter things – she is not entitled under Inland Revenue regulations to a refund of contributions. She is, however, entitled to compensation under the pension review – the compensation given should be in the form of pension benefit, so the compensation payment should be paid to an approved pension arrangement. But if the teacher earns less than £30,000 she could consider investing future contributions in a concurrent personal pension rather than AVC scheme. She would then have the option of a tax-free cash lump sum from the personal pension trust."

If you have any questions about personal finance topics or problems, please write to Questions of Cash, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk. We regret that we can reply only to letters published here. Please send copies, not originals, as we cannot undertake to return material.