When Zosia’s ISA provider queried her identity documents, the delay meant she missed out on a large amount in potential bonuses.
What happened
Zosia wanted to save for later life, so decided to open a Lifetime ISA. She provided identity documents to support her application, but the provider said they weren’t properly certified.
This delayed her being able to open the account, which then went past her 40th birthday.
Zosia said this delay meant she missed out on potentially getting £10,000 in bonuses paid into her Lifetime ISA over the next ten years.
She complained to the ISA provider and, disappointed with their response, brought the matter to us.
What we said
We asked to see the documents that the provider said hadn’t been certified correctly. The person certifying Zosia’s passport had written her occupation as ‘investment banking’. The business said it believed her field of work was more relevant, rather than her occupation as an investment banker.
We felt that the business hadn’t made this clear to Zosia and had only stated the general requirements. We upheld Zosia’s complaint and told the business to put things right. To decide how much compensation we would ask it to give Zosia, we had to assess a series of variables.
We first assumed that Zosia would have contributed the full £4,000 Lifetime ISA allowance each year for the full ten years. This 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 the money in the Lifetime ISA for another ten years for the bonus to gain interest. We assumed a 'proxy' rate for this of 4%, which 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 as a lump sum to make the same amount in the next 20 years. Using an online compound interest calculator, assuming an average 4% return, this came to £8,250.
There were many variables that could affect this outcome, such as whether Zosia made the maximum contributions or whether the investment returns were less than 4%.
We upheld Zosia’s complaint but – taking all the variables into account – we concluded it would be fair to reduce the lump sum by 25%. This brought the amount down from £8,250 to £6,000, which we directed the firm to award to Zosia in compensation.