"It was just sheer panic," Kathleen Simmonds

Inadequate

At fault are the endowment policies sold by insurance companies in the late 1980s and early 1990s.

Endowments were offered as a way of saving via the stock market to build up a lump sum big enough to pay off a loan, typically after 25 years.

But the expected investment growth has not materialised and the policies are proving woefully inadequate.

Kathleen has had a �50,000 endowment mortgage for 10 years.

After receiving the bombshell letter from her endowment provider, Guardian Financial Services, she called her Dad, Rob, for advice.

What was just as shocking, with hindsight, was a message in bold type on the first page of the letter.

It said it was "necessary" for Kathleen to double her monthly endowment premium to �144, and that she didn't need to take any action because the extra money would be collected automatically by Direct Debit.

A range of facts

In fact, endowment companies are supposed to present a range of options to policyholders.

Raising the premium could be the wrong thing to do. But alternatives, such as paying off a lump sum or saving in another way, were put in a less prominent position on page two of the letter.

Rob, a retired aircraft engineer, took a careful look at the endowment problem.

Solution

His solution was to refuse to pay the higher premium. Instead, he advised Kathleen to start making regular repayments to cover the �19,000 potential shortfall.

Then, while they were down at the Nationwide Building Society doing the paperwork, they discovered that she could switch to a new mortgage with a lower interest rate.

After tinkering with the mortgage, Kathleen found that she had dealt with the endowment gap and she was paying less every month.

"We can guarantee to satisfy the shortfall," enthuses Rob, "And it's less expensive. I'm delighted."

Before the makeover, Kathleen's monthly mortgage payment had been �435, made up of: