What is a Pension Mortgage?
A pension mortgage is an interest only mortgage with an additional investment plan in the form of a personal pension. Sold mainly in the 1980s and 90s, they were touted as a cheap and easy way to pay a mortgage.
However, they were anything but. Customers were actively encouraged to swap from their existing repayment mortgage to a Pension Mortgage, lured with the prospect of cheaper, interest-only monthly payments. But bundling home ownership with pension planning into one financial product was inherently risky, as many customers discovered to their cost.
Because only 25% of the pension pot could be used to repay the mortgage loan, the fund needed to grow to four times the amount of the mortgage. And poor investment returns since the 1980s have left many pension policies worth a fraction of the value customers were led to expect. With less cash available at retirement - and less to pay off the mortgage - many people were left high and dry at an extremely vulnerable time.
As with Endowment Mortgages, this is not simply about a loss in anticipated growth. It's about poor advice. If the sales advisor failed to adequately inform you about the product - or properly take into account your circumstances - then you may well have been mis-sold. If you're still unsure, we urge you to read the statements below. If any apply to you, then you could well have grounds for complaint.
1. You were not adequately informed about the risk
The advisor did not tell you that a Pension Mortgage carries a risk of shortfall at the very time when you can least afford it.
2. Your attitude to risk was not discussed
The advisor failed to properly ascertain your attitude to risk - and whether you were prepared to risk not being able to pay off your mortgage. This is extremely important and should have been analysed in depth by the advisor prior to any recommendation.
3. You weren't told about alternative products
The advisor did not offer you the chance to compare other, potentially less risky alternatives to a Pension Mortgage by discussing the different options available.
4. You weren't told what would happen in the event of poor performance
Did the advisor warn you that a shortfall at retirement would mean finding other funds to repay the outstanding balance of the mortgage - not to mention coming to terms with living on a reduced income from your pension?
If you're still unsure what this means to you, read the case study below, which shows just how a Pension Mortgage can be mis-sold - and what happens when we pursue a claim.In 1990, Mr L was advised by his provider to switch from his existing repayment mortgage and take out a Pension Mortgage instead. Sadly he was not told that there was a risk of shortfall or that he needed to extend his mortgage over a term of more than 25 years.
We complained to the pension provider and the complaint was upheld. However, the firm's initial calculations showed that Mr L had not suffered a financial loss and so he was due no compensation. Our claims experts examined the loss calculations and discovered that the firm had not carried them out in accordance with FSA rules and so disputed the decision. Eventually the firm conceded the argument and recalculated the loss, this time offering Mr L the correct figure of £3,747 in compensation - proving that persistence and expertise can make all the difference to a claim.
At this point, you may be sure you want to claim, but perhaps you've heard a couple of pension mortgage myths about complaining. Let's clear those up right now. Even if you've stopped paying in your pension, you can still make a claim. And claiming compensation will not affect your retirement or pension.
What can you do to seek compensation?There are two main options open to you. You can claim on your own, or use an expert. Now we feel it's important to stress that we can't guarantee you a payout, more money or a faster service than you would get on your own. And we'd advise you to steer clear of anyone who makes this claim.
However, we do offer an honest, expert, hassle-free service with no upfront costs. What's more, we're regulated by the Claims Management Regulator in respect of regulated claims management activities and guided by our own stringent Code of Conduct.
Understandably, you may want to know a little more about us - and whether we're right for you. If so, we'd love to tell you a bit more about ourselves - and why over 700,000 people have trusted EMCAS with their claims.
If, on the other hand, you'd like us to work with you for your compensation, we'd be delighted to help. If you've been mis-sold a Pensions Mortgage, you're entitled to financial justice. Request a call back from one of our down-to-earth, expert advisers by clicking here.
We'll call you back at a time convenient to you and get the process started. You can then relax, knowing we'll be doing everything in our power to secure you the financial justice you deserve.