Zosia wanted to open a Lifetime ISA, but delays meant that she missed out on a large amount of potential bonuses, so she came to us to investigate. 

What happened

Zosia wanted to save for later life so planned to open a Lifetime ISA. But the business told her that she hadn’t supplied properly certified identity documents. This delayed her being able to open the account, which then went past her 40th birthday.

When she brought her complaint to us, she said that this delay meant that she missed out on potentially getting £10,000 in bonuses into her Lifetime ISA over the next ten years.

What we said

We asked to see the documents that the business said hadn’t been certified correctly to see what had happened. When we looked at them, we saw that the person certifying her passport had written their occupation as ‘investment banking’. The business said that they believed this was more relevant as a field of work rather than the occupation, and they should have written that they were an ‘investment banker’.

We felt that the business hadn’t made this clear to Zosia and had only reiterated the general requirements. We decided to uphold Zosia’s complaint and told the business to put things right.

When we looked at how much compensation we would ask the business to give Zosia, we had to assess a series of variables that could impact on her future contributions, and what effect that might have. 

We first assumed that Zosia would have contributed the full £4,000 Lifetime ISA allowance each year for the full ten years, which would have given her the 25% £1,000 bonus each year. Over the ten years until she turned 50, she would have received £10,000 in bonuses. If Zosia had wanted to benefit from this bonus she would have needed to keep it in the Lifetime ISA for another ten years, which would have allowed the bonus to gain interest. We assumed a 'proxy' rate for this of 4% and would have meant that the bonus would increase to £18,000 over the ten years. 

We worked out how much Zosia would need to invest now as a lump sum in order to make the same amount in the next 20 years, assuming an average 4% return. Using an online compound interest calculator, this came to £8,250. 

But there were many variables that could affect this outcome, such as Zosia not making the maximum contributions or investment returns being less than 4%. We considered these and therefore decided it would be fair to make a 25% reduction in the lump sum. This brought the amount down from £8,250 to £6,000.