Rising toll of income plan victims

HUNDREDS of elderly people have lost thousands of pounds through unsound home income plans. But the Securities and Investments Board, the City's chief regulator, fears there may be others who have not yet realised that they could be victims, writes Maria Scott.

The SIB is appealing to people who think they may have one of these plans to come forward. It is issuing a fact sheet through Citizen's Advice Bureaux to help people work out whether their scheme is one that is likely to have put them at risk. A help desk has been set up, although it is accepting only written inquiries.

Home income plans were sold in the late Eighties by independent financial advisers and by the tied agents of large insurance companies. Elderly people were encouraged to raise mortgages on their houses and invest the proceeds in investment bonds. The aim was for the bonds to produce returns large enough to provide an income and pay interest on the mortgages.

The schemes fell apart when investment returns plummeted along with house prices, leaving many elderly people unable to meet the mortgage payments. They faced sky-rocketing debts on depreciating assets.

The Investors Compensation Scheme, which is dealing with most claims for losses on home income plans, believes it is obliged by its rules to apply strict criteria in calculating settlements. Some of its judgements have already been the subject of court challenges and there will be a further hearing on 21 June.

This concerns the ICS's view that it is not obliged to compensate people who bought their home income plans before 28 August 1988 - the date the compensation scheme was launched - unless they received fresh advice about their plan after that date.

Investors such as Vera Hawkins stand to gain thousands of pounds if this review goes in their favour. Mrs Hawkins bought her plan in 1987 from a firm called Aylesbury Associates. She had a bond from Scottish Mutual to pay a mortgage from Cheltenham & Gloucester Building Society. After she discovered that the bond would not repay the loan, she and her husband repaid pounds 15,000 of their mortgage but they still have a debt of pounds 50,000.

Mrs Hawkins, of Bromley, Kent, is also secretary of the Home Income Plan Support Group. She says she is appalled at the attitude of the ICS.

'People have been paid money by the ICS but still been left with big mortgages,' she complains. 'How can a man in his late sixties or seventies living on the state pension be expected to afford a pounds 25,000 mortgage?'

Richard Barnett, of the London solicitors Barnett Sampson, does not think it adequate for the SIB to distribute the leaflets simply through Citizen's Advice Bureaux. 'There should be a national press campaign and possibly some television advertising as well,' he says. 'There should also be a telephone helpline.'

People who think they may have a problem should write to the SIB at Gavrelle House, 2-14 Bunhill Row, London EC1Y 8RA. The Home Income Plan Support Group can be contacted on 081-462 3255.

(Photograph omitted)