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calculating compensation in investment complaints

Where we decide that a consumer should be compensated for investment loss that happened because they received unsuitable advice from a business, we usually aim – as far as possible – to put the consumer in the position they would now be in if they had not been given unsuitable advice. This usually involves deciding what the consumer would have done with the money instead.

putting the consumer as far as possible in the position they would be in

What will be right for the consumer will depend on circumstances of each case.

In some cases we may decide the consumer would have left the money where it was. In others we may be able to identify the investments the consumer would likely have made instead.

But in some cases we may not be able to identify the investments the consumer would likely have made if the business acted correctly.

what if we think the consumer would have left the money where it was?

We will usually tell the business to pay compensation based on what the consumer’s money would have been worth if it hadn’t been moved

what if we can reasonably identify the investments the consumer would have taken out?

We will usually tell the business to calculate compensation based on what the consumer would have got from those investments.

If the discussions at the time focused on a different investment as an alternative – and we conclude that the consumer would have chosen that – we might tell the business to pay compensation as though the consumer had made that investment instead.

what if we think the consumer would have invested differently – but we can’t say what exactly they would have done differently?

Sometimes, even if we can’t identify exactly what alternative investments the consumer would have made, we are able to identify some qualities those investments would have.

In these cases, we will tell the business to use a measure – usually a published benchmark or index or a combination of those – that would broadly reflect those qualities and that we think, overall, reflects how the money might have been invested.

The amount of money the chosen measure makes (or losses) should be a reasonable reflection of the amount of the money the consumer would have made (or lost) if things hadn’t gone wrong. The financial business should compare this with what return the consumer actually got.

Examples of the measures we might decide to use include:

  • Where we decide the consumer wanted to achieve a reasonable return and some flexibility with their investment but did not want to risk their capital, our starting point will usually be to tell the financial business to compare what the consumer would have got if the return on the investment had matched the average rate for a one-year fixed-rate bond (as published by the Bank of England compounded annually) with the performance of the actual investment. This does not mean that the consumer would have invested only in a fixed-rate bond. Rather, this broadly reflects the sort of investment return a consumer could have obtained with little risk to capital.
  • Where we decide the consumer was prepared to take some risk – for example, by investing a higher proportion in the stock market with the objective of getting a higher return, we might tell the financial business to compare the return the consumer would have got based on the FTSE WMA (formerly APCIMS) Stock Market Total Return Income Index with the performance of the actual investment.
  • Where we decide the consumer’s risk profile was in between – in the sense that they were prepared to take a small level of risk to achieve their investment objective – our starting point might be to tell the financial business to compare the return the consumer would have got from a 50/50 combination of the two benchmarks above with the performance of the actual investment. This does not mean we assume that 50% of the money would have been invested in cash and 50% in some kind of index tracker fund. Rather, we consider this a reasonable compromise that broadly reflects the sort of return obtainable from lower risk investments.

In other cases, other benchmarks or indices may be appropriate.

In some cases, although we know what the consumer got was not right for them, there may not be enough reliable evidence about the sort of investment the consumer might have made instead. Or there may be some other reason why it is not possible to identify a suitable benchmark. In such cases we might tell the financial business to use a benchmark linked to the Bank of England base rate to assess any loss.

what if the consumer has to pay an advice fee to put things right?

Where we conclude that the consumer was given unsuitable advice, and where the consumer had to, or will likely have to, pay fees for further advice to put the matter right, it would be appropriate for the consumer to be repaid the fees relating to the unsuitable advice. We take the view that a business should not keep fees that it took for the advice that we consider was unsuitable.

We will usually tell the business to return the fee(s) it took for the unsuitable advice – together with simple interest at 8% a year.

However, where the business has already taken appropriate action to correct the situation without charging a further fee, it would not be fair to ask it to give the fee back.

Where the fee for the unsuitable advice was paid by way of commission that has been taken through charges, compensation for the investment loss should use the actual amount of money the consumer paid. No separate calculation needed in respect of the fees.

where the consumer no longer has the unsuitable investment

We will usually tell the business to calculate the investment loss up to the date the consumer ceased to have the investment. This means comparing the consumer’s position at that date with the position they would have been in at that point if they hadn’t taken out the unsuitable investment.

In addition to the compensation for the investment loss – up to the date the consumer ceased to have the investment, we are likely to tell the business to pay interest on the investment loss – from that date up to the date the business pays the compensation.

This is to reflect the fact that the consumer has been “deprived” of the compensation for the investment loss since it accrued.

Interest paid might be subject to income tax. The law requires the business to deduct income tax at the lower rate from this interest and to pay this to HMRC.

In most circumstances we’re likely to set the interest rate at 8% per year simple. This takes into account what the consumer is likely to get after tax, and what it would otherwise have cost to borrow money during the period the consumer was ‘deprived’ of it .

deciding whether to keep or change the unsuitable investment

When a consumer brings a complaint about an investment to us, it is up to the consumer whether they “cash in” or make changes to the investment while we are looking at the complaint. We can’t give the consumer any advice about what they should do.

It is generally best for the consumer to discuss this decision with a professional who will be able to help them understand what the decision might mean for them – particularly if the investment offers life assurance cover or some other guarantee.

what if the consumer wants to cash in the investment?

If the consumer does decide to cash in the investment, they should tell us. As we set out above, if we then decide the investment was not suitable, we will usually tell the financial business to calculate any compensation in two parts – one up to the date the investment was cashed in, and the other covering the time since then.

Cashing in an investment does not automatically mean that a complaint will be upheld. We may decide the investment advice was suitable even though the consumer has lost money.

what if the investment cannot be sold or surrendered?

Sometimes an investment is suspended, or there is no market for it. This means it cannot be sold or surrendered for a value – or the customer might be told that (for any number of reasons) it doesn’t currently hold a value. We call these ‘illiquid investments’.

This does not mean that the illiquid investment has no intrinsic value. In the future money might be released from it - or things might change and it might become possible to sell the investment for its value.
Where we uphold a complaint about an unsuitable investment, if the investment is still in force our compensation award will normally allow for the current market value of the investment.

For an illiquid investment we would usually say that the value of the investment should be assumed to be nil. This is because no value can be accessed and we can’t be sure about what value, if any, the consumer might be able to realise from the investment in future.

If the business pays the full compensation calculated on this basis, the consumer will have got back the fair value we believe is due so they won’t be out of pocket - even if they don’t ever receive anything back from the illiquid investment in future.

In these situations, if a value did become available from the investment we don’t think it would be fair for the consumer to receive this on top of the fair value they have already received. So we say ownership of the illiquid investment should be transferred to the business – so that the business will receive any later value or payments from the investment.

It’s up to the business to arrange this. It can be done in several ways depending on the specific illiquid investment - such as using a deed of assignment or having the investment put into the business’ name.

But sometimes the full fair value we believe the consumer should receive is higher than the maximum amount the ombudsman can order a business to pay. In that situation we can recommend that the financial business pays the fair value in full - but they don’t have to follow this recommendation.

So if the business chooses to limit its payment to the maximum amount we can order them to pay, we consider it fairest for the consumer to keep the illiquid investment. This means the consumer can use any payment which might come from the investment in future to top up the compensation they have received and make it up to the full fair value. Once what they have received reaches the full fair value, the consumer would be required to allow ownership of the investment to be transferred to the business.

In pension cases if the business takes ownership of the illiquid investment, it should first pay a commercial value acceptable to the pension provider before arriving at the rest of the fair compensation.

what if the consumer wants to keep the investment?

If we uphold the complaint, we will usually tell the financial business to work out any compensation to date. If the consumer decides to continue to keep the investment afterwards when they could have sold it - and then suffers further losses, we will usually conclude that they cannot recover those losses.

calculating compensation

We can set out compensation in these cases either as an amount of money or as a formula – sometimes called a “formulaic award”.

Where we make a formulaic award, the financial business should work out the compensation in line with the approach we have set out. It should then send a copy of the calculation to us and the consumer. The calculation should be set out in a way that is easy to understand.

will the ombudsman check that compensation calculations have been carried out correctly?

Like a court, where we tell a financial business the basis on which to pay compensation, we do not as a matter of course check the details of the calculation the business subsequently carries out. However, we aim to make sure that we explain the principle behind the calculation so that the consumer can understand the overall approach and the various stages and processes it will involve.

It is very important that consumers understand how we intend things to be put right for them – even though they may not be able to perform the more complex calculations themselves or know exactly what the final figure will be.
Once a financial business has carried out the calculations, if a consumer has a specific concern about them, we can look at what the financial business has done to see whether it has followed what we told it to do.

Please see the sample calculations that show what the calculation should look like.

what if the consumer would have paid charges in any event?

Whether or not we allow for the charges in the calculation depends on the circumstances of the individual case and the measure we use.

In assessing what would be fair compensation, our aim is to put the consumer as close to the position they would probably now be in if they had not been given unsuitable advice.

Where it is not possible to say precisely what the consumer would otherwise have done, we tend to use the return based on a benchmark to reflect what the consumer might reasonably have made (or lost) if things hadn’t gone wrong.

The investment the consumer would have made if things had not gone wrong might have done better or worse than this benchmark return. But the benchmark is a broad brush measure that we think is fair in the circumstances.

If we reduced this for charges, we would effectively be assuming that the consumer would have made an investment that would have always underperformed the benchmark.

The poor advice the business gave meant the consumer did not have a chance to choose an appropriate investment – and some of those investments may have done significantly better than the benchmark, despite the charges.

So reducing the benchmark return to allow for charges does not seem fair to the consumer particularly given that some investments have very low charges, and those that charge more would normally be recommended because the extra management or service offered was expected to boost performance to compensate.

Adjusting the benchmark return for charges would also complicate the calculation for consumers and financial businesses. This extra complexity is not justified given that the benchmark return is not the actual figure the consumer would have got before charges, but a broad measure of the overall potential loss.

So, we generally consider it fair to use the benchmark return as a measure of what the consumer would have got net of charges.

how should capital withdrawals and income payments be treated in the calculation?

The treatment of income and other withdrawals depends on the circumstances of the case.

Our general approach is that the calculation of investment loss needs to take into account amounts paid out by way of withdrawals, distributions of capital, or income paid before tax.

The business should ensure that their calculations properly reflect the history of the investment – involving a series of calculations to allow for regular or non-regular withdrawals, as and when they were made.

For example, where an investment was designed to produce a regular income, the business shouldn’t deduct all the withdrawals upfront before calculating the return. Instead, they need to make a series of calculations – each one reflecting income withdrawn at a different time.

In some cases there will have been several income payments. To keep the calculation simpler in these cases, we may say that it is acceptable for the business to first calculate the compensation without taking away the regular payments – and then reduce this amount by the total income payments. The business should not take away the income payments first before calculating the return.

what if an enhanced allocation rate applied to the unsuitable investment?

We usually say that the compensation calculation should use the actual amount of money that the consumer paid.

For example, if the consumer paid £10,000 - but an enhanced allocation applied (so £10,200 was invested) – the compensation calculation should use the £10,000 figure to work out what return the consumer would have got had their money been invested differently.

When comparing this with the return the consumer actually received, any “benefits” the consumer may have had from the actual investment are automatically allowed for.

what if life cover was required?

Where we decide that life cover would have been appropriate for the consumer, we will usually tell the business to take this into account in the compensation calculation by including the cost of an appropriate life assurance policy.

Where the investment included life cover and that cost can be identified, we will usually tell the business to take this into account – and deduct from the compensation calculation the cost of the life cover that had already been provided. This should follow the same method used for withdrawals and income payments.

It is then up to the consumer to decide whether to keep the original policy or surrender it and lose the existing life cover.

sample calculations

The sample calculations show how the calculations should be carried out. These are only illustrations – and do not reflect the consumers' actual circumstances.

  • benchmark: average rate for fixed rate bonds
    • example 1: investment in force at the time of calculation
    • example 2: investment NOT in force at the time of calculation
    • example 3: investment in force at the time of calculation and there were small number of withdrawals
  • benchmark: WMA Income total return index
    • example 4: investment in force at the time of calculation
    • example 5: investment NOT in force at the time of calculation
    • example 6: investment in force at the time of calculation and there were small number of withdrawals

example 1: benchmark: average rate for fixed rate bonds
investment in force at the time of calculation

Mrs S invested £10,000 on 5 February 2011. She later complained that the recommendation was unsuitable for her. She still held the investment.

We upheld her complaint and directed the financial business to provide compensation based on original capital, applying growth at the average rate for fixed rate bonds with 12 to 17 months maturity as published by Bank of England, on a monthly basis but compounded annually.

The calculation was carried out on 3 September 2012 and at the time the investment was still in force, worth £9,500.

The Bank of England website showed the following rates.

date rate date rate
31 Jan 11 2.55 31 Jan 12 2.48
28 Feb 11 2.54 29 Feb 12 2.51
31 Mar 11 2.80 31 Mar 12 2.49
30 Apr 11 2.79 30 Apr 12 2.71
31 May 11 2.77 31 May 12 2.73
30 Jun 11 2.81 30 Jun 12 2.76
31 Jul 11 2.80 31 Jul 12 2.66
31 Aug 11 2.78 31 Aug 12 2.51
30 Sep 11 2.70 30 Sep 12 2.49
31 Oct 11 2.68    
30 Nov 11 2.60    
31 Dec 11 2.61    

Source: Bank of England 1 year fixed rate bond IUMWTFA series

The period for this investment started on 5 February 2011. The rate used for each month was the rate from the end of the previous month. So, the rate used for February 2011 was 2.55%.

  • From 5 February 2011 to 28 February 2011 inclusive, there were 24 days. To work out the growth for February 2011, the financial business multiplied the investment of £10,000 by 0.0255 (2.55%) and by 24/365 – giving a result of £16.77.
  • For March 2011, there were 31 days at 2.54% (the rate as at the end of February 2011), so the growth for that month was £10,000 multiplied by 0.0254 and by 31/365 – giving £21.57.
  • This process continued for each month up to and including 4 February 2012 (end of first year of investment), where the investment of £10,000 was multiplied by 0.0248 and by 4/366 (a leap year) – giving £2.71.
  • At this point, the growth over the previous year, totalling £270.18, was added to £10,000.
  • For the period 5 February 2012 to 29 February 2012 inclusive, there were 25 days. The growth for that period was £10,270.18 multiplied by 0.0248 and by 25/366 – giving £17.40.
  • This process continued up to and including 3 September 2012. The growth for each month from 5 February 2012 to 3 September 2012 totalling £156 was added to £10,270.18 producing a final figure of £10,426.18.

This is what Mrs S would have got as at 3 September 2012 using the average rate as the benchmark. However her actual investment was worth £9,500. The financial business calculated that Mrs S had suffered a loss of £926.18. It paid that compensation to Mrs S.

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example 2: benchmark: average rate for fixed rate bonds
investment NOT in force at the time of calculation

Mrs S invested £10,000 on 5 February 2011. She surrendered the investment on 3 September 2012 and received £9,500. She complained to us about the suitability of the investment.

We upheld her complaint and directed the financial business to provide compensation based on original capital, applying growth at the average rate for fixed rate bonds with 12 to 17 months maturity as published by Bank of England, on a monthly basis but compounded annually.

  • The calculation and settlement was made on 5 November 2012.

The Bank of England website showed the following rates.

date rate date rate
31 Jan 11 2.55 31 Jan 12 2.48
28 Feb 11 2.54 29 Feb 12 2.51
31 Mar 11 2.80 31 Mar 12 2.49
30 Apr 11 2.79 30 Apr 12 2.71
31 May 11 2.77 31 May 12 2.73
30 Jun 11 2.81 30 Jun 12 2.76
31 Jul 11 2.80 31 Jul 12 2.66
31 Aug 11 2.78 31 Aug 12 2.51
30 Sep 11 2.70 30 Sep 12 2.49
31 Oct 11 2.68    
30 Nov 11 2.60    
31 Dec 11 2.61    

Source: Bank of England 1 year fixed rate bond IUMWTFA series

The period for this investment started on 5 February 2011. The rate used for each month was the rate from the end of the previous month. So, the rate to used for February 2011 is 2.55%.

  • From 5 February 2011 to 28 February 2011 inclusive, there were 24 days. To work out the growth for February 2011, the financial business multiplied the investment of £10,000 by 0.0255 (2.55%) and by 24/365 – giving a result of £16.77.
  • For March 2011, there were 31 days at 2.54% (the rate as at the end of February 2011), so the growth for that month was £10,000 multiplied by 0.0254 and by 31/365 – giving £21.57.
  • This process continued for each month up to and including 4 February 2012 (end of first year of investment), where the investment of £10,000 was multiplied by 0.0248 and by 4/366 (a leap year) – giving £2.71.
  • At this point, the growth over the previous year, totalling £270.18, was added to the initial figure of £10,000.
  • For the period 5 February 2012 to 29 February 2012 inclusive, there were 25 days. The growth for that period was £10,270.18 multiplied by 0.0248 and by 25/366 – giving £17.40.
  • This process continued up to and including 2 September 2012. The growth for each month from 5 February 2012 to 2 September 2012 totalling £155.30 was added to £10,270.18, producing a figure of £10,425.48.

This is what Mrs S would have got on 3 September 2012 using the average rate as the benchmark. She actually got £9,500 from the investment. So, her loss at the date of surrender was £925.48.

To this loss, simple interest had to be added at 8% a year from 3 September to the date of settlement.

Settlement was made on 5 November 2012, or 63 days later. Interest at 8% a year on £925.31 for 63 days out of 366 amounted to £12.74.

The business was required to pay compensation for the investment loss of £925.48 and interest of £12.74.

Interest is usually subject to income tax, although compensation for the investment loss is not. Please see “Is compensation taxable?” on our website.  

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example 3: benchmark: average rate for fixed rate bonds
investment in force at the time of calculation
there were a small number of withdrawals

Mr K invested £10,000 on 5 March 2012; he withdrew £500 a month on the 1st of each month between 1 April 2012 and 1 August 2012. He complained that the recommendation was unsuitable for him. He still held the investment.

We upheld his complaint and directed the financial business to provide compensation based on original capital, applying growth at the average rate for fixed rate bonds with 12 to 17 months maturity as published by Bank of England, on a monthly basis but compounded annually.

The calculation was carried out on 2 September 2012. At that time, the investment was still in force and was worth £6,500.

The Bank of England website showed the following rates.

date rate
29 Feb 12 2.51
31 Mar 12 2.49
30 Apr 12 2.71
31 May 12 2.73
30 Jun 12 2.76
31 Jul 12 2.66
31 Aug 12 2.51
30 Sep 12 2.49

Source: Bank of England 1 year fixed rate bond IUMWTFA series

The period for this investment started on 5 March 2012. The rate used for each month was the rate from the end of the previous month. So, the rate to used for March 2012 was 2.51%.

  • From 5 March 2012 to 31 March 2012 inclusive, there were 27 days. To work out the growth for March 2012, the financial business multiplied the investment of £10,000 by 0.0251 (2.51%) and by 27/366 (2012 was a leap year) – giving a result of £18.52.
  • For April 2012, there were 30 days at 2.49% (the rate as at the end of March 2012) but Mr K withdrew £500 from the amount invested, so the growth for that month was £9,500 multiplied by 0.0249 and by 30/366 – giving £19.39.
  • For May 2012, there were 31 days at 2.71% (the rate as at the end of April 2012) but Mr K withdrew a further £500 from the amount invested, so the growth for that month was £9,000 multiplied by 0.0271 and by 31/366 – giving £20.66.
  • This process continued up to and including 2 September 2012. Mr K did not make a withdrawal that month. Growth for the whole period totalled £114.22 but Mr K had withdrawn £2,500 from the investment, leaving £7,500, producing a final figure of £7,614.22.

By deducting the value of £6,500 from that final figure, the financial business calculated that Mr K had suffered a loss of £1,114.22. It paid that compensation to Mr K.
What if the withdrawal was made on a different date instead of 1st of each month?

If the withdrawal was made on a different date, for example on 15th day of each month, then:

  • From 5 March 2012 to 31 March 2012 inclusive, there were 27 days. To work out the growth for March 2012, the financial business multiplied the investment of £10,000 by 0.0251 (2.51%) and by 27/366 (2012 was a leap year) – giving a result of £18.52.
  • For April 2012, there were 30 days at 2.49% p.a. (the rate as at the end of March 2012) but Mr K withdrew £500 on 15 April 2012. So the business calculated growth on £10,000 for 14 days and then for £9,500 for 16 days.

and so on.

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example 4: benchmark: FTSE WMA Stock Market Income total return index - investment in force at the time of calculation

Mrs J invested £50,000 in a fund on 11 March 2010. She complained that it was unsuitable for her. She still held the investment.

We upheld her complaint and directed the financial business to provide compensation in comparison to WMA Income total return Index.

The calculation was carried out on 16 November 2012. At the time, the investment was still in force, worth £40,000.

  • The WMA Income Index value on a total return basis was 2,031.37 on 11 March 2010 and 2,383.82 on 15 November 2012.
  • £50,000 divided by 2,031.37 multiplied by 2,383.82 gives £58,675.

So, Mrs J's loss was £18,675 (£58,675 less £40,000), which the business paid.

Source: FTSE International Limited ("FTSE") © FTSE [2013]

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example 5: benchmark: FTSE WMA Stock Market Income total return index - investment NOT in force at the time of calculation

Mrs J invested £50,000 in a fund on 11 March 2010. She surrendered the investment on 16 November 2012 and received £40,000. She complained that the fund was unsuitable for her.

We upheld her complaint and directed the financial business to provide compensation in comparison to WMA Income total return Index.

The calculation and settlement was made on 15 March 2013.

  • The WMA Income Index value on a total return basis was 2,031.37 on 11 March 2010 and 2,383.82 on 15 November 2012
  • £50,000 divided by 2,031.37 multiplied by 2,383.82 gives £58,675

So, Mrs J’s loss as at 16 November 2012 was £18,675 (£58,675 less £40,000).

To this loss, simple interest had to be added at 8% a year from 16 November 2012, to the date of settlement. Settlement took place on 15 March 2013, or 119 days later. Interest at 8% a year on £18,675 for 119 days was £487.

The business was required to pay compensation for the investment loss of £18,675 and interest of £487.

Interest is usually subject to income tax, although compensation for the investment loss is not. Please see “Is compensation taxable?” on our website.

Source: FTSE International Limited ("FTSE") © FTSE [2013]

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example 6: benchmark: FTSE WMA Stock Market Income total return index - investment in force at the time of calculation
several withdrawals/income payments

Mrs B invested £25,000 in a fund on 20 April 2010. She took an income of £100 a month from 20 May 2010 through to 20 October 2012. She complained that the fund was unsuitable for her. She still held the investment.

We upheld the complaint and directed the financial business to provide compensation in comparison to WMA Income total return index.

The calculation was carried out on 16 November 2012 and at the time the investment was still in force, worth £18,200.

Method 1:

date in/out index value comment
20 April 2010 £25,000.00 2,077.47 £25,000.00  
20 May 2010   1,982.44 £23,856.42 £25, 000 divided by 2,077.47 times 1,982.44
  less £100.00   £23,756.42  
20 Jun 2010   2,018.57 £24,189.38 £23,756.42 divided by 1,982.44 times 2,018.57
  less £100.00   £24,089.38  
and so on to ...
20 Oct 2012   2,419.43 £25,929.71 £25,883.41 (Sep 2012 figure) divided by 2,415.11 times 2,419.43
  less £100.00   £25,829.71  
16 Nov 2012   2,374.79 £25,353.14 £25,829.71 divided by 2,419.43 times 2,374.79

Thus £25,353.14 was the amount Mrs B would have got using WMA Income index as the benchmark. But she actually got £18,200 from the investment. So, her loss to 16 November 2012 was £7,153.14. 

Method 2:

In this example, there were a large number of monthly withdrawals / income payments. Deducting them from the investment each month meant that the index value for each month was required and calculation had to be carried out as at each month.

Where there is a large number of withdrawals as in this case, it may be acceptable, to keep calculations simpler, if the financial business totals all such regular payments and deducts that total from the end value instead of periodically deducting them. It should not deduct the total from the start value.

On that basis:

  • The WMA Income Index value on a total return basis was 2,077.47 on 20 April 2010 and 2,374.79 on 16 November 2012.
  • £25,000 divided by 2,077.47 multiplied by 2,374.79 gives £28,577.90
  • there were 30 regular withdrawals of £100 each between 20 April 2010 and 16 November 2012.
  • So, the final value as at 16 November 2012 was £25,577.90 (£28,577.90 less £3,000).

Mrs B's investment was worth £18,200 on 16 November 2012 giving a loss figure of £7,377.90 under this (simpler) method.

Source: FTSE International Limited ("FTSE") © FTSE [2013]

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other forms of compensation

Occasionally we may decide that an investment should be “rescinded” – that is, unwound back to the beginning. We might do this where, for example, the complaint involves a protection policy with little or no investment value. In these cases, we are likely to tell the financial business to refund the premiums with interest (usually at a rate of 8% per year simple).

tax treatment

The section of our website is compensation taxable? gives information about the tax treatment of compensation that we award.

compensation over £150,000

The section of our website what if we think that fair compensation will be more than the maximum limit of £150,000? gives information about our approach where we think that the £150,000 limit (£100,000 for complaints we received before 1 January 2012) might be exceeded.

problems with getting the compensation

what if the financial business does not pay the compensation?

See the section of our website what a "final decision" by an ombudsman means?

what if the calculation requires information from other parties?

The formulaic award will tell the financial business what it needs to do. This might include asking for past information, or an up-to-date value on an investment it is no longer advising on. In these circumstances, consumers can contact the investment provider to get the information the financial business needs and we can then pass this on to the financial business. The consumer should speak to us first to make sure they are asking for the right information.

who will pay any costs incurred by the financial business for the calculation of compensation?

The financial business will usually have to meet these costs itself.

other technical notes

help for businesses and consumer advisers

contact our technical advice desk on 020 7964 1400

This is part of our online technical resource which sets out our general approach to complaints about a wide range of financial products and issues. We would like your feedback on how helpful you found it. Please also use the feedback form below to tell us about anything you think we could clarify or explain better.

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more information

  • help for businesses and consumer advice agencies

    The law requires us to decide each case on the basis of our existing powers and what is fair in the circumstances of that particular case.
    We take into account the law, regulators’ rules and guidance, relevant codes and good industry practice at the relevant time.
    We do not have power to make rules for financial businesses.
    Our current approach may develop in the light of circumstances disclosed by further cases we receive.
    We may decide that fairness requires a different approach in a particular case.
  • The law requires us to decide each case on the basis of our existing powers and what is fair in the circumstances of that particular case.
    We take into account the law, regulators' rules and guidance, relevant codes and good industry practice at the relevant time.
    We do not have power to make rules for financial businesses.
    Our current approach may develop in the light of circumstances disclosed by further cases we receive.
    We may decide that fairness requires a different approach in a particular case.