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ombudsman news

issue 5

May 2001

a selection of recent cases - illustrating the range of complaints dealt with by the investment division


In January 1990, Mr W and his brother were each sold a personal pension plan with an annual premium of £10,000. They said the adviser guaranteed they would receive a pension of at least £520 and £600 per week respectively.

When the elder of the brothers reached retirement, he discovered the annuity would be far less than he had been led to believe. The adviser denied having given any guarantees. However, the recollections of a second adviser, who was present when these pensions were sold, appeared to confirm the brothers' version of events. We therefore held a hearing to try and establish exactly what had been said.

At the hearing, the adviser continued to maintain he had given no guarantee. The second adviser recalled certain figures being discussed but could not recollect his colleague saying the figures were guaranteed. The brothers said they had checked with the firm in 1997 that the pensions were still on track to provide the guaranteed amounts, and they had been assured this was the case. The brothers' solicitor argued that his clients were given a guarantee at the point of sale and that this constituted a binding oral contract.

The firm denied there had been any guarantee and said the fact that the investors had checked the pensions' performance in 1997 was at odds with their claim that they had received guarantees. The firm also referred to the illustrations the investors were given, which showed that the benefits at retirement were not guaranteed.

We concluded there was insufficient evidence that the adviser had given a guarantee. However, we were concerned about the standard of the advice he had provided. His explanation of what he had said at the point of sale was somewhat misleading, and our investigation revealed that he had advised the brothers to cancel two other policies without justification. In addition, the firm's record keeping was inadequate.

We thought the adviser had failed in his duty to advise with reasonable skill and care, particularly bearing in mind that, because of their lack of pension knowledge, both brothers relied heavily on him to give appropriate advice. We awarded each brother the maximum amount of compensation for distress and inconvenience. We also ordered the firm to reinstate the brothers' cancelled policies and meet the costs of the brothers' solicitor in representing them at the hearing.


A few months after Mrs A and her husband separated, she contacted the firm from which they had bought a joint-life endowment policy. She was told she no longer had any access to the policy. Acting on receipt of a deed of assignment, the firm had assigned the policy to her husband, leaving her with no entitlement to any of the benefits or proceeds.

After asking the firm to send a copy of the deed of assignment, Mrs A's solicitor drew the firm's attention to the defects he found in it. The firm subsequently confirmed that it should never have accepted the deed because of the defects. However, some nine months later, the firm contacted Mrs A's solicitor again to say that the deed was valid after all.

One of the letters Mrs A's solicitor sent to the firm had suggested that she did not recall signing the deed, but this was never pursued. However, she disputed the deed's validity on the grounds that it contained defects.

A deed may contain defects and still be valid. When we looked into the case we decided that despite its defects, this deed of assignment made it clear that Mrs A assigned all her interest in the policy to her husband.

She had objected to the fact that a member of her husband's family had signed the deed as a witness, but this did not render the deed invalid since there was no requirement that the witness should not be a family member. We concluded that the firm had not been at fault in accepting the deed. There was no reason to doubt its authenticity and its purpose was clear.

The following two complaints concern firms' administration.


Ms J encountered administrative problems in her dealings with a firm from which she was entitled to receive a windfall, following its demutualisation. She complained on several occasions after she realised she had not been receiving correspondence about the demutualisation.

Despite the firm's repeated assurances that its record of her address was correct, the problems continued. Eventually, she discovered that the firm had confused her details with those of another policyholder with similar initials and the same date of birth. The firm offered £100 as compensation for the inconvenience it had caused, but she rejected this offer.

When she received her windfall payment, the cheque was made out in the name of the policyholder with similar initials, and the payment related to that person's policy, not to hers. The cheque was for just over £300 more than she was entitled to. After she returned the cheque and lodged another complaint, the firm said it would send her a cheque made out in the correct name. She would receive a higher amount than the sum she had been expecting, in recognition of the inconvenience and distress she had been caused.

When Ms J received the new cheque, her name was correct but the sum did not include the compensation she had been promised. She banked the cheque and, following our involvement, accepted an offer of £350 from the firm.


Mr and Mrs A had been in dispute with their life company for some time before they brought their complaint to us. They claimed the firm was not correctly addressing the mail it sent them. They had brought this to the firm's attention on a number of occasions but still sometimes received letters using the "incorrect" address, even though the firm said it had amended its records.

The address the firm had been using was correct but it did not include the name of the village where Mr and Mrs A lived. The Post Office did not state this village name in its official address for the couple.

We did not uphold the complaint. The firm was not in breach of any regulation; it was required only to send mail in such a way that the Post Office could deliver it promptly.

This complaint concerning a term assurance policy illustrates the importance of making a will.


An engaged couple, Mr G and Miss L, received financial advice six months before they were due to marry. As a result, Mr G took out a term assurance policy to protect a mortgage on a house the couple had bought in joint names. The sum assured became payable in the event of his death. Miss L had sufficient life cover from an existing endowment policy. As Mr G's policy incorporated critical illness protection, it was not possible to arrange for the proceeds payable upon on his death to be passed directly to a designated party. Instead, the proceeds would pass to his estate.

Unfortunately, three months before the couple were married, Mr G drowned. Miss L claimed on the term assurance policy but was told the proceeds would pass to his estate. Since the couple had not been married and Mr G had not made a will, the estate went to his family, who also inherited half of the house.

There was clear evidence that Mr G had taken out the term assurance to protect the mortgage. However, his family refused to use the proceeds of the policy for this purpose, stating that their son would surely not have intended that ‘in the event of his untimely death...[they] should suffer at the hands of strangers.' The representative defended the sale of a policy which only covered Mr G by stating that he had advised the couple to make wills. Miss L disputed this. As the outcome of the case would turn on this issue, we arranged a hearing to try and establish which version of events was correct. Two weeks before the hearing was due to take place, the firm offered to pay half of the outstanding mortgage and Miss L accepted this, deciding to pursue a claim for the remainder of her fiance's estate through the courts.

This investor claimed that the adviser had guaranteed the maturity value of an endowment assurance policy.

In 1993, Mr H was sold a 15-year endowment assurance policy for an annual premium of £5,000. The representative had shown him tables of past with-profit maturity values and had made a handwritten note in the margin "£5,000 yearly over 15 years", with an arrow pointing to the handwritten figure of £254,000. He had also written down the policy's expected maturity value - a figure that was not in the tables but which he had extrapolated from them by multiplying the figure given for an annual premium of £120.

Some seven years later, Mr H complained to the firm after receiving illustrations of the policy's projected maturity value that were substantially lower than the figure the representative had quoted. The firm offered to rescind the contract and refund all the premiums he had paid, together with interest.

After Mr H referred the case to us, the firm agreed to offer an additional sum of £150 for the distress and inconvenience caused. However, Mr H rejected the firm's offers. He said he wished to receive the same maturity value that he claimed the representative had guaranteed, based on growth at a rate of 12% per annum.

We did not uphold the complaint. The representative's handwritten note did not constitute a guarantee. It had been written on a leaflet giving examples of past performance figures, which included a warning that future bonuses were not guaranteed and that the policy might not do as well in the future as it had in the past. It was clear that the representative had taken figures from the past performance tables to produce his handwritten note.

The firm's offer was equivalent to the amount we would have awarded if we had found the firm had misrepresented the policy. Since the offer was still available, we recommended the investor to think again about accepting it.

The following three pension review cases, each involving a different firm, concern customers who were wrongly advised to transfer from an occupational pension scheme to a personal pension.


The firm that advised Mrs D to leave her occupational scheme accepted that its advice had not complied with the regulator's rules. However, it argued that this advice was not the cause of Mrs D's potential loss. She would, it claimed, have gone ahead with the transfer even if its advice had been compliant.

The firm suggested that the financial viability test it conducted as part of the pension review demonstrated that Mrs D was prepared to accept the level of risk associated with the transfer. The critical yield (the amount of growth the policy needed in order to match the guaranteed benefits of Mrs D's occupational scheme) was within the boundaries of the growth rates the firm used for the original comparison between the occupational scheme and the personal pension.

From the evidence we looked at, we concluded Mrs D was not a high-risk investor. We took the view that if the firm had complied with regulations when advising her, it would have needed to have given a realistic indication of the level of growth required to match the benefits of her occupational pension scheme. We considered that if it had done this, she would not have proceeded with the transfer, so we upheld her complaint.


After reviewing Mr F's pension mis-selling complaint, the firm concerned accepted that he had lost out as a result of its advice to transfer from his occupational pension scheme. It offered him an immediate additional annuity. However, Mr F turned down this offer of redress because it would affect the state benefits he was receiving.

He referred the complaint to us when the firm said it could not make an alternative offer. We did not uphold the complaint. The firm had correctly followed the pensions review guidance and had made an appropriate offer of redress.


Mr V refused an offer of redress, claiming that his loss was greater than the firm's loss assessment indicated. The firm then carried out a second loss assessment. This revealed that the mis-selling had not, in fact, caused any loss.

We did not uphold Mr V's complaint as he was not able to demonstrate that he had suffered any loss. We could not order the firm to honour its original offer, as Mr V had hoped we would, since he had rejected it and the second loss assessment had been correctly carried out in accordance with the pensions review.

This case concerns a "pre A-day" pension transfer (one that was carried out before the regulations brought in under the Financial Services Act came into effect).

When Mr T first brought his complaint to us it was clear he had been disadvantaged by transferring out of his employers' pension scheme and buying a personal pension instead. However, we were unable to find in his favour because of lack of evidence. We told him we would review the case if he could provide any further evidence.

He then sent us a copy of a newspaper cutting featuring an advertisement. The advertisement was headed, "Ex-employees of ***** (the company where Mr T had worked)" and stated in large letters, "YOUR PENSION IS FROZEN". The advertisement claimed, among other things, "Your pension fund will GROW" and "LARGER pension at retirement" and it said the personal pension on offer would "equal or better" the pension scheme offered by Mr T's former employers.

When we presented the pension firm with this new evidence, they first tried to suggest the advertisement had not been aimed at Mr T. They then implied that he had printed the advertisement himself. Finally, since the newspaper cutting was undated, they suggested the advertisement could have appeared after the date of Mr T's transfer, and therefore be quite unrelated to it.

Mr T had told us at an earlier stage of the approximate date when he had first seen the advertisement. In the absence of any evidence to the contrary, we thought the balance of probabilities suggested the advertisement was genuine.

The date when the transfer took place meant it did not fall within the scope of the pension review. However, it seemed reasonable and logical to us to require the firm to assess Mr T's loss and provide redress in accordance with the pensions review guidance. In addition, we awarded him £400 for the distress and inconvenience the firm had caused him, since he had just been recovering from depression when he discovered he had lost out as a result of the transfer, and this had caused additional upset.

Walter Merricks, chief ombudsman

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.