A simple plan

By SARAH PENNELLS
Updated:

 

A SIMPLE 10-year savings plan at £15 a month is turning into a costly 35-year nightmare for Elizabeth Mailey. Elizabeth, now 39, faces premiums that will rise year-by-year until she is paying £421 a month at 60 - and there seems to be nothing she can do about it.

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The saga began in 1987, when Elizabeth started a 10-year savings plan and paid the monthly premiums of £15 recommended by her independent financial adviser. She wanted to put money aside for a windfall at the end of the millennium while having the option to continue investing for longer. To boost the policy's return, she agreed to increase the premium automatically by 10% a year.

All appeared well until Elizabeth, a pharmaceuticals consultant, and husband Jonathan tried to raise extra cash this year for an extension to their cottage in Staplefield, West Sussex.

Elizabeth asked about cashing in the plan - which she voluntarily extended beyond the original 10-year term to enjoy some extra growth - and found that it had actually been written to run until she reaches 60. If she tries to cash it before 2022 she will face early repayment penalties. The 10% annual increase in premiums mean she will eventually pay £421 a month to Windsor Life, which took over General Portfolio, the original manager of the plan.

Elizabeth discovered that despite having paid £5,600 in premiums since 1987, the plan was worth just £6,900. And she cannot claim compensation for being mis-sold a policy because it was taken out before the Financial Services Act was introduced to protect consumers from bad advice. Any investment or savings product sold after April 1988 is covered by FSA rules. Consumers can complain about the way it was sold and claim compensation if it was unsuitable.

Investors wrongly sold products before this date can apply for compensation only if they were advised by one of the life insurance company's own employees or representatives. Life companies agreed to give the Ombudsman power to look at the way a product was sold before the Financial Services Act came into force as though it were regulated by the Act.

That will not help Elizabeth, who dealt with an independent adviser whose name is not on the original paperwork and who cannot be traced. Andy Cowan of Edinburgh-based independent financial adviser Aitchison & Colegrave, which has reviewed the case, says Elizabeth's situation reveals a loophole in customer protection. He is convinced that she was mis-sold the policy.

'The sale had commission written all over it - the adviser would have been paid more for selling a long-term plan. Yet it was clearly not what the client wanted - you would never sell someone a 35-year savings plan when they only wanted to put money aside for about 10 years. It is astounding that Elizabeth has no chance of compensation now because of a quirk in the rules over who is responsible for past mistakes.'

Windsor Life has already compensated 50,000 General Portfolio customers because of the way their policies were sold.

But chairman John Wybrew says that because Elizabeth bought her policy from an independent adviser, Windsor Life will not compensate her.

'The company that advised her on the policy had no connection with General Portfolio and so falls outside our compensation criteria,' he says. 'She must contact that company directly if she has a complaint.'

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