Friends Provident (FP)...inconsistent mathematics (Other Mortgage Lenders)

Member Name: eclipse

Product:	Other Mortgage Lenders
Date:	19/08/00 (180 review reads)
Rating:

Advantages: normally quite responsive as a company

Disadvantages: complicated and seemingly various ways of calculating bonuses

Not so much to do with a mortgage lender, in this case, but the cover for it.
Almost 20 years ago, we bought our present house and converted a FP with-profits policy to an endowment, to help cover a part of the mortgage. We also took out another low-cost one, to make up the difference.
Now, the arguments about the pros and cons of endowments have been raging for quite some time. Unlike many people, however, we have kept our policies going, mainly because one of them is now quite valuable and it would be foolhardy to be panicked into cashing it in; especially as it hasn't got long to run.

We have friends who have turned their endowments in and lost thousands of pounds value in the process. This is exactly what the companies want you to do...cash in and get off their backs.

The gripe here is not the endowments themselves, but the way that FP appear to have manipulated all the annual and terminal bonus calculations. Recent discussions with them over a projected shortfall in the cheaper policy revealed that their calculations are, to say the least, very suspect.

One policy has, according to our reckoning, been projected and calculated (by FP) with zero terminal bonus and almost negative % growth for the next nine years, even failing to meet the guaranteed amount. FP denied this over the phone, at the same time going through their explanation of how they calculate bonuses. On speaking to a more
experienced rep, however, the methods suddenly changed! The inconsistencies in determining annual bonuses is quite amazing; it seems FP can work things out in half a dozen different ways, to get half a dozen end results...depending
on the person you happen to be discussing your problems with!
Terminal bonuses were once offered at 195%. Even allowing for this to fall to just 10%, and a pathetic annual growth rate bonus of just 2%,our policy would be worth more than what has been suggested.

When questioned as to what
had happened to all the terminal bonus money, in "the pot" over twenty years of the policy's life, FP could not provide satisfactory answers. We are now in the process of arranging to tackle a FP rep
directly; ambiguous answers and calculations simply are not acceptable.

Many of you will know that FP have recently announced plans to demutualise.This is supposedly in the interests of policy-holders; experience suggests otherwise. FP would appear to be covering up serious problems at deeper
levels and if you are thinking of taking up a long-term policy with them at the moment (August 2000), I would hold off.

Financial plans like these can be extremely complex to understand, which is why people fight shy and just accept whatever they are told. Even IFAs
don't always get it right. Equitable Life has already been a good example of how things can go badly wrong; there might be more on the way.

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