Although the FOS confirmed it had received relatively few complaints regarding the mis-selling of pension mortgages, it admitted it had seen a steady increase in this area. It has now outlined the principles it follows when calculating redress.
Like endowment policies, pension mortgages can be risky, with the amount of money clients getting at the end of the policy term depending on stock market performance.
Calculating the amount of redress can be particularly complex, the Ombudsman said. Only the cash element of the pension, or sometimes just part of it, would have been intended for mortgage repayments and pensions themselves cannot usually be surrendered.
Therefore, it would only be if both the mortgage and pension elements were ‘manifestly’ unsuitable that redress might be made by cancelling the entire policy, refunding premiums paid as well as interest.
The FOS stated typical reasons for redress in its latest newsletter. Its case studies for the mis-selling of pension mortgages included a situation where the mortgage would have been paid off earlier had the consumer taken a repayment mortgage, mis-selling where a pension plan was already in existence, and redress where the consumer had subsequently increased paid contributions to the pension plan.
David Higgins, director at Re-Financial Planning Ltd admitted his shock that people were still involved with pension mortgages and explained that they would be very unattractive in today’s market. He said: “I can’t believe there are many people selling this type of product in this day and age. I can only imagine that the cases being cited are historical. Pension mortgages are not reflective of what is being sold in today’s mortgage and investments market, as the money you have to put in is unappealing.”
