Dr Huddy, a retired consultant chest physician, has been told that he can expect to receive pounds 4,200 to pounds 4,330 in September from the Investor Tax-Free Bond he took out with the Fleet Friendly Society 10 years ago. His wife Alice took out a friendly society plan with Teachers' Assurance 10 years ago and has just collected pounds 5,441.
Dr Huddy is especially aggrieved since he paid slightly higher premiums than his wife. When he first took out the policy he paid pounds 238 a year, increased to pounds 245 in 1989 after a reduction in tax relief. His wife paid pounds 213.
With hindsight, Dr Huddy chose the wrong friendly society to invest with. But his experience does not inspire confidence at a time when friendly societies are only weeks away from having the power to diversify into a wide range of new investment management activities.
The Fleet was taken over by Homeowners Friendly Society in 1989 after running into financial difficulty. It is now becoming clear to Fleet policyholders that their plans may not have been managed in the most efficient way.
One important technical reason for the difference in the value of the Huddys' policies is that Mrs Huddy's, sold under the name High Yield Savings Plan, was a with- profits plan where guaranteed bonuses were added each year, smoothing out the ups and downs of the stock market.
Dr Huddy's policy was a unit-linked one, where premiums bought units in investment funds. There are no bonuses, so the return depends on the value of the underlying investment funds at the time of maturity.
But there is more behind the poor return than this. Part way through the life of his plan Fleet decided to set up a property fund. The principal investment was in the society's head office in London.
Clare Parker, assistant marketing manager at Homeowners - now responsible for the former Fleet business - says investors were given a choice about whether to have part of their premiums put into this fund. She believes investors were asked to return a card if they wanted to go into property.
Records held by Homeowners show that members who opted to go into the fund made a one-off contribution at the end of 1988. This was 7 per cent of the value of their investments at the end of that year.
Dr Huddy maintains that he decided not to go into property and never gave the society permission. But it now turns out that some of his money did go into the fund.
When Homeowners took over Fleet the property fund was valued at pounds 855,000. At the end of 1991 the figure was pounds 620,000. A valuation for 1992 is being completed.
There are no regulations prohibiting friendly societies from investing in property or controlling the proportion of total assets held in property, although it can affect solvency ratios. Ms Parker said Homeowners would look into Dr Huddy's grievance about the property investment.
But problems with the former Fleet policies do not end there. The Investor Tax- Free Bond originally undertook to split its investors' money between a Halifax Building Society account and the Barclays Unicorn 500 Trust, a unit trust specialising in smaller companies.
Later, Ms Parker says, this money was switched to the less specialised Barclays Unicorn Trust. Given the poor performance of smaller companies in the past few years this may have benefited investors, but Ms Parker said that Fleet should not have switched the money.
Another probable reason for the disappointing return on Dr Huddy's policy is its high level of expenses.
Ms Parker said: 'With Fleet there was a 0.75 per cent a year management charge. Then there was a pounds 10 charge for every premium contributed, so on a policy requiring a twice-yearly premium, as Dr Huddy's did, the charge would have been pounds 20 a year. There was also a set-up charge of pounds 50.
'Charges for the nearest equivalent Homeowners policy at the time were 0.75 per cent in annual management fees and 20 per cent of the first year's premiums taken out as a set-up charge.'
Ms Parker said that unit-linked policies sold by Homeowners 10 years ago were now paying out well over pounds 5,000.
Dr Huddy feels that Homeowners should have reorganised the Fleet investments to improve returns for investors, but Ms Parker says this was impossible under the terms of the policy contracts.
Dr Huddy's experience will strike a chord with many people who have bought policies from Lancashire & Yorkshire Friendly Society. They are still waiting to hear the date of a High Court case to decide whether the society is liable to pay them compensation for wrongly investing some of their money in a property fund.
Derek Lee, chairman of the Friendly Societies Commission, would not comment on the affairs of Fleet and Lancashire & Yorkshire. But he did not believe their problems indicated widespread mismanagement.
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