Jason Nissé: Why didn't the FSA have the guts to tell us we were poorly endowed?

The letter that plopped on to my doormat a year ago was hardly welcome. Lloyds TSB was informing me that the endowment policy, which it had sold me with such seduction eight years ago, was already falling short of the target return needed to pay off my mortgage, despite a six-year bull market which had only recently come to an end.

It suggested that I might want to pay a bit more to put it back on track. Thankfully, it also suggested that I might consider putting some money aside to cover the shortfall and/or ask it to investigate whether the policy had been "mis-sold". Upping my payments seemed rather like throwing good money after bad, so I went for the other options.

I'm not alone. Some six million householders received these letters, of which about a million were told that there would definitely be a shortfall, and about two million that there was likely to be a problem. Since the letters have gone out, the UK stock market (in which the vast majority of endowment money is invested) has fallen a fifth. Unless there is an amazing recovery, when the next batch of letters goes out next year (the firms have to review the position every two years), most of the six million households will face the stark news that the money they have been saving will not be enough to cover their home loans.

These letters – endorsed by the Financial Services Authority and the Association of British Insurers – were a classic case of good intentions making a problem worse. Most endowments were poor ideas when they were sold and became worse as inflation, interest rates and investment returns fell. By the time these letters went out, no one in their right mind would have been buying a new endowment, and you had to be pretty thick to put more money into an old one.

Anyone who increased their payments would be worse off today than if they had taken the money and put it under the mattress. So why did the financial regulator and the industry trade body back a letter suggesting such a strategy?

When I asked them, I got the usual blarney about this being a long-term savings product that you could not assess on a year's performance. When I argued that an already bad situation had been blown further off course, I got a marvellous comment about the FSA not being able to regulate performance. What it should have said was: "We really wanted to send a letter out saying 'you bought a dud product – gird yourself for the consequences' but the industry would have kicked up a fuss."

So here we are. Tens of thousands of people are worse off because the FSA is not tough enough. If you get a letter next year asking you to put more into your endowment, you know where to stick it.

Tempus fray

Sir Martin Sorrell should listen to Abby Joseph Cohen. The WPP boss is so concerned that his shareholders will think he is paying too much for Tempus Group that he is wriggling like a landed salmon in an attempt to get out of the bid. But I don't think either the "material adverse change" clause or the competition authorities will get him off the hook, and so he will end up with the business.

But is this such a disaster? If you take the view that 11 September changed the world order and destroyed not only market valuations but the basis for business in the media sector, you would argue that paying something north of £400m for a media buyer is bad business.

Alternatively, you might take the view that the current market situation is a disruption – which has genuinely harmed some businesses, such as aviation, but is being exploited by others to push out bad news they'd been bottling up. In that case paying, say, £150m too much for Tempus is not that significant for WPP, which even after recent falls is worth nearly £6bn.

And if you take the Cohen line, that markets will bounce back and be a third higher by the end of this year, then WPP won't have paid all that much more for Tempus than it's really worth.

j.nisse@independent.co.uk