15 December 2004
Lloyds TSB has announced it is to set up a £110 million compensation fund for people who have been mis-sold endowment mortgages.
It will cover endowment contracts at Lloyds TSB and at Scottish Widows and follows previous provisions totalling £250 million, including £150 million in 2003.
In the 1980s millions of consumers were sold endowment mortgages, which they were told would mature and pay off their mortgages - and probably deliver a surplus.
The under-performance of the stock market since then means that many people are left with a shortfall between the value of their loan and the amount their endowment policy will pay out. If this risk was not fully explained (as was the case in an estimated 80 per cent of cases at one point), consumers are entitled to compensation from the institution that sold them the policy.
The Financial Ombudsman Service is expected to receive in the region of 70,000 endowment mis-selling complaints this year - an increase of 20,000 on last year.
Lloyds TSB said in a statement it is currently reviewing the impact of the level of complaints received.
It said the charge would ensure that "adequate provision for any ongoing liabilities is maintained".
Despite this fund, it is expected Lloyds TSB will report earnings in 2004 as "broadly in line" with current market expectations - with profits of around £3.33 billion, excluding gains or losses from business sales and investments.
Chief executive Eric Daniels said: "Despite the slowdown in growth in demand for consumer credit, we are continuing to make progress to deliver sustained earnings momentum."
He added: "The group is on track to make further earnings progress in 2005 and beyond."
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