The importance of being normal

An international development campaign worker thought he understood basic English when he was sold a Legal & General endowment mortgage to back a late 80s home purchase.

But with around half the 25-year mortgage term already past, policyholder Ivan Nutbrown, aged 51, and his partner Jennie Kitteringham, a further education officer aged 52, have discovered the Alice in Wonderland world of life insurance language.

Here words mean exactly what their writers mean them to mean - neither more nor less. The word "normal", in particular, seems to have a special meaning in Legal & Generalese - leaving the policyholders to ask themselves just what normal is.

Mr Nutbrown's story is the latest episode in the long running saga of endowment mortgage holders who had been lulled into the product by offers of the full repayment of the mortgage plus a tax-free lump sum. This was on top of a promise that the endowment premium would be unchanged until it matured.

Now the North London couple face the prospect of paying more than a third as much again for the rest of the term if they want the plan to pay off their loan. Based on an L&G review, there will be a £5,300 shortfall on their policy when it matures in May 2012 (using the Personal Investment Authority's 6% investment growth rate). The original plan was intended to repay a £42,000 loan.

Putting the policy back on track, L&G calculated late last year, would require £26.59 a month for the remaining 12 and a half years of the term - a total of £3,988.

Mr Nutbrown was sold the policy by an estate agent in March 1987 when the couple bought a house in North London - not the one they now inhabit, although they kept the policy when they moved five years ago.

He says: "It wasn't our first home purchase but the previous ones had been financed by standard repayment loans. This time, we were persuaded by the estate agent that we would be fools to go for another repayment mortgage and that the endowment root was the only sensible solution. I bought it. The estate agent did give us a couple of quotes from other life companies but they were all very similar."

Helping the couple to "buy it" was some convincing literature. The L&G Build-up Mortgage Plan was, the sales material said, "designed not only to repay your mortgage and protect it with life assurance - it also offers the prospect of a substantial cash sum at the end of the term."

It also stated that "the proceeds of a life assurance policy are used to repay the capital sum at the end of the term."

Mr Nutbrown says: "That seems quite clear. When the policy matured, the capital sum would be cleared. There would have been no point signing up for something where there is a question mark. And if it is designed to do something and fails to do it, then the consumer should not have to pay. If I buy a television and the sound does not work, then I would not expect to pay more for a separate loudspeaker."

The L&G leaflet went fur ther. Under the heading "Certainty", the life company told its customers that "you can certainly plan your long term financial commitments with certainty".

But Mr Nutbrown says that is the last thing he can now do. "I thought that the £66.44 a month I was paying would pay off the home loan. And I planned a job move on that basis." He intends to change his present job and work part-time for a third world development charity which will result in an earnings fall.

Additionally, the couple were told the policy was "designed so that the guaranteed sum plus future bonuses should be more than sufficient to repay your loan at the end of the term." In fact, L&G was so sure of its position that it held out the prospect of a lump sum of nearly £20,000 over and above the £42,000.

But it was the frequent use of the word "normal" that finally convinced the couple. Mr Nutbrown says: "I suppose I might have thought that if something very abnor mal happened such as a war, revolution, a famine or a natural disaster, then all bets were off. But as far as I can see, life is still very normal. Both the stock market and the economy are booming."

L&G's Peter Timberlake says that Mr Nutbrown and Ms Kitteringham have misunderstood "normal".

He says: "When we use the word "normal", we mean annual. It applies to bonuses which are issued every year - other companies call them annual or reversionary. It simply says we are contracted to provide a bonus every year."

Mr Timberlake adds: "What people were told in 1987 is not what insurers might be saying now."

Mr Nutbrown says that none of the literature referred to the possibility of forking out more, and the plan sellers, who earned commission that was undisclosed but likely to be around £1,000, did not warn him.

Mr Timberlake says health warnings did not appear until 1988 when the Financial Services Act came into force.