Ask Sindie: 'My endowment mis-selling claim led to a dead end'
Can you still get compensation if your adviser has stopped trading?
Sunday 13 November 2005
I have recently written to my endowment company to complain about a possible mis-sold policy.
I was told to contact the financial advice and insurance intermediary that had sold the policy to me. But when I did, I discovered this company was no longer trading.
Can you please advise me what to do next?
PM, via email
Not all is lost for the consumer when a company stops trading. But much will depend on whether it's gone bust, slipped into administration or changed into a new firm altogether.
As a customer with a complaint over a possible loan mis-sale, you first need to establish the precise status of the company you bought the product from, says Emma Parker, a spokeswoman for the Financial Ombudsman Service (FOS).
If the intermediary has stopped trading and is waiting to be wound up, it could still have some assets left. In this case, the FOS will take charge of your mis-selling complaint.
But if the original company has stopped trading under its old name and is continuing under a new one, you may be able to pursue your mis-selling claim yourself - backed up by the FOS if you get nowhere, Ms Parker says.
There could be a fly in the ointment here, though. The business may be trading in new guise but have ditched its old liabilities - including any responsibility for your policy. In this case, you would need to contact the Financial Services Compensation Scheme (FSCS) for help.
Finally, if the company has simply gone bust, you should again contact the FSCS, which will handle your mis-selling claim. A £48,000 limit applies to any compensation paid.
If, in any of these scenarios, a mis-sale is found to have taken place, you'll be eligible for compensation. This is usually worked out by comparing your current financial position with what it would have been had you taken out a repayment mortgage.
However, there is a further complication in each of these scenarios. If you were sold a policy before 29 April 1988, you won't qualify for help from the FOS. And if the sale was before 28 August in the same year, you won't be eligible for assistance from the FSCS.
Essentially, this is because rules on the selling of endowments were tightened from then on. So if you were mis-sold the policy before the above dates, sadly, you won't be able to claim any compensation. Hopefully, though, you'll be one of the 90 per cent of claimants who were sold endowment mortgages after the 1988 cut-off dates.
The good news is that help is available to you to determine the current status of the advice company that sold you the policy. Try the Financial Services Authority's consumer helpline on 0845 606 1234; the FOS on 0845 080 1800; or FSCS on 020 7892 7300.
I've had two mailshots from the Children's Mutual land on my doormat, advertising its child trust fund [CTF].
My baby is two months old and I know I should be thinking about the best way to invest the £250 [voucher, available to all children born after 1 September 2002]. But I really don't have the time to go and see anyone.
My bank (Barclays) has also been in touch but I'd rather not have all my money with one provider.
Can I simply save time and go with the Children's Mutual?
No doubt it feels like a chore but you really should make time to consider the options for your baby.
That £250 voucher is to be locked away - along with any other money up to £1,200 that you can afford to invest tax-free each year - for 18 years. Over this long a period, there will be great potential to generate a handy lump sum when your child comes of age.
There are basically three options available to you.
Put the voucher into a cash deposit fund, where it will earn between 3 and 5.5 per cent interest a year.
Or invest in a cheap-to-run shares fund with a "lifestyling" facility that switches the cash into safer deposit accounts once your child reaches the age of 13.
Or you could opt for a riskier shares fund with higher annual charges.
The decision will come down to your attitude to risk. You need to be happy with where you're putting the money - whether it's earning a steady interest rate in a bank or building society, or generating possibly higher returns in a shares-based fund that might also fall in value if the stock market falters.
Some independent financial advisers recommend sticking the cash in shares, arguing that, over such a long period, any downturn in the markets will be smoothed out. But others argue that a deposit account will give parents peace of mind.
Take 30 minutes to log on to childtrustfund.gov.uk, a government-sponsored website, and click on its "Use our toolkit" icon. This offers useful advice and includes a list of providers.
If you need help from our consumer champion, write to Sindie at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS or email email@example.com. We cannot return documents, give personal replies or guarantee to answer letters. We accept no legal responsibility for advice given.
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