The first is a repayment mortgage where each payment to your mortgage lender every month reduces the amount you owe. So long as you keep up repayments during the term of the mortgage, you are guaranteed to repay it. This is the simple, risk-free way to repay a mortgage.

The alternative is an interest-only mortgage. Each payment to the mortgage lender every month is only paying the interest on the amount you owe. You are not reducing the mortgage. Therefore, in order to ensure the repayment of your mortgage, your mortgage lender will normally insist you have a repayment vehicle such as an investment or savings plan in place to build up a cash sum.

Traditionally, most homeowners with an interest-only mortgage had an endowment policy as their repayment vehicle. This is commonly known as an ‘Endowment Mortgage’.

When the endowment policy matured in 25 years the cash sum received was expected to be sufficient to repay the mortgage loan. Most endowment policies were sold in the 1980s and 1990s on the basis they would repay the mortgage and provide a surplus cash fund. In reality, many homeowners faced shortfalls on their Endowment Mortgages.

A Pension-linked Mortgage is similar to an Endowment Mortgage – you have an interest only mortgage and use the cash available from your pension to repay the mortgage.

While Pension-linked Mortgages offer a tax-efficient way in which to repay a mortgage, they have many risks which means they are only suitable for a limited number of people.

Due to this, a large number were potentially mis-sold to thousands of homeowners in the UK. If it can be demonstrated that your Pension-linked Mortgage was unsuitable and therefore mis-sold, you could be entitled to compensation.

Most Pension-linked Mortgages are / were supported by a personal pension or retirement annuity contract. These are very different to endowment policies.

With an endowment policy you take the entire maturity value as a cash sum to repay the mortgage. So if your mortgage is £50,000, that is the target endowment policy maturity value required.

However, with a personal pension or retirement annuity contract, the amount of cash that can be taken is generally no more than 25% of the policy value. This means that the policy value has to be four times’ the amount of the mortgage. For instance, if you have a mortgage of £50,000, your personal pension would need to be valued at a minimum of £200,000 to enable you to take a £50,000 cash sum from it (25%) to repay your mortgage.

This makes Pension-linked Mortgages risker than Endowment Mortgages because you are required to invest substantially more money into the personal pension to achieve the target cash sum.

The reality facing the majority of homeowners who took out a Pension-linked Mortgage is that there will be a shortfall in cash available from their personal pension or retirement annuity contract to repay their mortgage.

If that wasn’t bad enough, the pension income they’ll receive from the remaining fund value will be a fraction of what they were told they would receive as well.

This will be a devastating outcome for the many thousands of people sold Pension-linked Mortgages; not enough money to repay their mortgage and a pension much lower than they expected.

In many cases, homeowners will be expected to continue repaying their mortgage during retirement using that reduced pension income.

Many homeowners may not realise there is a problem until they actually retire. This is because they have not been warned of potential mortgage shortfalls, as was the case for people with Endowment Mortgages.

For instance, if your pension policy is presently projected to produce a tax-free cash sum of £20,000 at retirement, but you owe £30,000 on your mortgage, your Pension Mortgage shortfall would be £10,000.

You can start your claim by calling us or by requesting a Claim Pack to be posted to you above.

In basic terms, the compensation you receive is the shortfall between what you would have repaid on the repayment mortgage and 25% of the value of your pension policy (the part of the policy that provides the tax-free lump sum with which to repay the mortgage).

That you might have since switched to a repayment mortgage or stopped paying into your pension policy should not prevent you from claiming compensation in respect of the period you had the Pension Mortgage if it was mis-sold.

You should beware of any claims management company that promises a result in a matter of weeks, since it is highly unlikely that this type of claim would be resolved that soon.

Our success fee is a very competitive 25% of the total compensation payment or monetary benefit we win on your behalf (inclusive of VAT). There’s nothing for you to pay until your claim is won and compensation settled.

As financial claims experts, we work closely with life offices and IFAs, and understand the processes involved in reaching the best outcome for our clients.