Need some advice ref next step with remaining mortgage

Hello I would value your advice/comments on my situation.

My mortgage is in 3-parts with the main lump covered by a guaranteed endowment which has now matured.
I have paid up on the main lump with some excess placed against the 2 other parts leaving £12K in total outstanding.
My Barcs/Woolwich advisor said as I can't pay off all the remaining mortgage now they would extend the payments over 5 more years. However as I have just retired but my wife who is 10 years younger they would need to set it against her but using joint incomes.
The advisor applied to the Woolwich to do this saying it was just a matter of the Head Office receiving her letter and changing over the DD from the finished mortgage to now pay off the other 2-parts.
They were set to end in July this year, 1 was C&R while the other was Interest only and it this one that I need the additional 5 years to pay off.


Some background:

1. Original endowment mortgage was in excess of amount borrowed and was GUARANTEED - lucky me.
2. The 2 extra mortgaged parts also had insurance policies with profits intending to cover them.
3. I got made redundant and needed to shrink my outgoings as my bank [Barclays] wasn't prepared to allow me time to find new employment.
4. I visited my branch to review my acc and these 2 polices were discussed with the acc person saying why did I need so much Life cover. What she didn't explain was that they were attached to my mortgage intending to pay them out.
5. As they got closed I now have this shortfall so I would like to extend my mortgage by 5 years to pay it off.
6. Barcs/Woolwich have just rung to say that because of the FSA they now want me to fill out a budget planner even though I have paid the mortgage for 25 years and now that that the endowment has matured I don't have that to pay so I have less going out of my bank acc anyway.

I think I was given poor advice in allowing me to close down the life policies with profits, shouldn't she have advised me of this. It was all done with Barcs policies.
The FSA involvement at 6. above is because of general questions about why mortgages are having to be extended i.e. poor policy selling.
I'm wondering if me being advised to close my policies would also be considered poor advice and if I should make a claim.

Thanks for reading