Attention Norwich Union Mortgage Endowment Policyholders
We are particularly keen to hear from Norwich Union mortgage endowment policyholders who may be entitled to compensation but have not yet complained.
Proposed changes to the way Norwich Union looks after policyholders money may lead to even lower payouts in the future that could have an important bearing on existing policyholders ability to repay their endowment mortgages.
£4 Billion Smash and Grab?
Norwich Union mortgage endowment policyholders need to be aware of certain important changes now underway at Norwich Union which may increase the likelihood their policies will fall short at maturity.
On 21st November 2006 Norwich Union, one of the UK's largest providers of mortgage endowment policies, announced that it wants to proceed with a fund transfer and reattribution of the inherited estate of two of Norwich Union's with-profits funds;
- CGNU Life With-Profits Fund
- Commercial Union Life Assurance (CULAC) With-Profits Fund
Which Norwich Union Policyholders Will Be Affected?
This proposal may impact on the future bonus payments and final maturity payouts for mortgage endowment policyholders with policies currently invested in the above two funds. Policies affected can include policies with the following companies;
- Commercial Union
- CGU
- General Accident
- CGNU
How Much Money Is Involved?
£4 Billion will be removed from the above funds and 'Reattributed' elsewhere.
Rather than use these profits to pay competitive bonuses to eligible policyholders today, Norwich Union wish to use the money elsewhere.
Where Has This £4 Billion Come From?
This £4 Billion is money that has built up over the years in these with-profits life funds which Norwich Union believes is above the amount that is expected to be needed to meet current and future policyholder commitments and other obligations such as tax and expenses.
Will Norwich Union Make Up The Shortfalls On Existing Policies?
To date Norwich Union has made no mention of using this £4Billion to make up the shortfalls on eligible policies.
Our own in-house view, and this is only our opinion, is that we would be very surprised if Norwich Union decide to top-up affected policyholders' policies, however we would love to be proved wrong.
Why Could This Increase the Shortfalls on Policies?
This £4 Billion is money policyholders could reasonably expect future bonuses to be paid from and historically speaking the bigger the fund the greater the likelihood that competitive bonuses would be paid.
Put simply - the greater the financial reserves, the greater the financial
resources from which bonuses can be paid, the greater the likelihood of competitive
bonuses, leading ultimately to policies being able to reach their target amounts.
Obviously if this financial reserve is being deliberately reduced it raises
the question as to whether this will mean lower future bonuses for existing
policyholders in the future.
What is Reattribution?
Reattribution is where eligible policyholders can choose to receive a payment in return for giving up any right to a possible future payout from the inherited estate.
Simply put - Norwich Union appear to be proposing to buy-off policyholders expectations by offering a one-off payment, or windfall.
It appears from the information Norwich Union have made available to date that this 'windfall' payment is not guaranteed to make up the shortfalls on the affected policies.
Overall
Given the financial hardship faced by homeowners relying on their endowments to repay their mortgages one would have thought this £4 Billion 'surplus' could be used to top-up policies at maturity rather than allowing Norwich Union shareholders to get their hands on policyholders money.
Why You Should Contact DTB Investments?
Whilst DTB Investments Limited is unable to provide advice as to whether policyholders should vote against, or in favour of this proposal, we can offer assistance to eligible policyholders facing shortfalls who have as yet not complained.
Our message is loud and clear;
"If you were not made aware your policy could fall short then you have a valid complaint and you may be entitled to compensation, even if you have surrendered your policy. You should act today before it's too late!"