Troubled holders of endowment mortgages are being told to take hope from new FSA rules, which will oblige life companies to make policyholders aware of the existence of the traded endowment policy market.
The FSA's rules take effect in Septmber, Surrenda-link, the UK's leading TEP Company estimates that this could make each policyholder over £1,400 more on average, should they sell their policy as opposed to surrendering.
Currently, if a policyholder contacts their life company because they are considering cashing in their policy, there is no obligation to inform them of the existence of the TEP market, even though they may get more for their policy by selling it to a TEP company.
In September that will change, meaning the possibility of more policyholders benefiting from the TEP market.
Matthew Roche, marketing manager at Surrenda-link, says: “The total market for traded endowment policies is worth an estimated £1bn a year. Last year, approximately £500m worth of policies were sold via the TEP market, which means that 50% of those cashing in their policies still missed out by surrendering and not selling.
“With the introduction of PS106 from the FSA, anyone wishing to surrender a policy will be informed of the option to sell. With this increase in awareness if the market grows by 25% it would result in an additional £125m policies coming onto the market.”