Questions Of Cash: 'Abbey left me short of cover when I really needed it'

Q. I took out an additional loan with Abbey on my mortgage in July last year and decided to transfer to Abbey my existing insurance, covering me against unemployment – adding accident and sickness. I arranged cover for £1,200 per month – 50 per cent each for my wife and myself. The policy was to start within two months, to allow my existing policy to close. At the end of last year there were many redundancies at my workplace, so I checked with Abbey that my insurance cover was valid. I found that neither my wife nor I were covered for redundancy.

I have complained several times, but this has not been resolved. One letter from Abbey claimed that I only requested unemployment cover after I had been made redundant. This is not true – I requested the cover from the beginning and I am still in work. My wife has since been made redundant. I stopped my direct debit payment as I was not covered for unemployment, which was my main concern. It also turns out that I over-insured my wife: Abbey's adviser did not tell me I could only insure her for up to half of the income she would lose if she became unemployed. When I spoke to Abbey again I was told to take the matter up with the Financial Services Ombudsman. I have decided to write to you instead. VK, Slough

A. Abbey has agreed to put right these problems and make several changes to your policy, while reinstating the policy and backdating the new arrangements. The total benefit level has been reduced to £800 per month, which means that you will not be paying for cover that you are not entitled to claim. The unemployment element of the cover will be added to the policy, backdated to inception. The cover will be split 50/50 between yourself and your wife, as specified by you. The claim in respect of your wife's redundancy will be honoured. You, though, will need to make a contribution towards the premiums that you missed when you ceased paying for the policy. The unpaid premiums added up to £151.80: but Abbey has agreed to meet half this cost. Your new monthly premium will be £62.16. You are satisfied with this arrangement.

Q. In September 2007 I opened a Super Saver account with Abbey. To do this, first I had to open a Direct Share investment account. In October I went into an Abbey branch to have my savings book updated. I found that no money had been paid into the Super Saver account, but money had been paid into a Flexible Saver account. I was told this would be corrected when I opened another savings account, which I did. But still no money was transferred from the current account to the savings account, despite repeated enquiries. MO, Hove

A. Abbey has agreed to reimburse you in full for all lost interest. It will also provide you with another £100 as a goodwill gesture for the inconvenience caused.

Q. I applied for an Abbey Direct ISA (Issue 2) on 13 April 2008. This entitled me to interest of 6 per cent. I transferred £18,847.04 from my Smile ISA, to get the higher rate of interest. The ISA was eventually opened, but my interest has been only £130.49. I don't understand why I have received such a small amount and why Abbey has only paid me interest from 2 September. The application was acknowledged by Abbey on 22 July. TW, by email.

A. We have taken this up with both Abbey and Smile. A spokesman for the Co-operative Bank, which owns Smile, says that they received your application to transfer the ISA from Abbey on 8 August last year. At that time, industry guidelines were for transfers to be processed within one month – they have since been strengthened to 14 days. A cheque was issued to Abbey, with the correct documentation, on 1 September: within the specified transfer period.

On 19 March this year, Smile was notified that its cheque to Abbey had not been cashed. Smile then asked Abbey whether it was still prepared to open the ISA: if it had not been, Smile would have reopened the ISA and paid additional interest for the period from 1 September. Smile then arranged with Abbey for it to belatedly open your ISA, with Abbey paying the higher rate of interest from 1 September. Abbey says "we selected 2 September as this was the date on which we initially received the funds from Smile" and has paid interest in full from this date.

Q. We may soon be ......... inheriting a large sum of money, nearly £50,000. Would it be best to keep it in the UK, or transfer it out of sterling? GA, by email.

A. There are several factors to bear in mind, not simply the recent weakness of sterling, says Meera Patel, senior analyst at advisers Hargreaves Lansdown. "In the last year we have seen sterling weaken relative to many currencies," she says. "However, this trend has been reversing in recent weeks and sterling has been strengthening as hopes for an economic recovery seem to be on the horizon. If you believe sterling will continue to strengthen, then this is the currency that you would want rather than investing it in a depreciating currency elsewhere. Also, remember the costs of converting from one currency to another and then back again at a later date could wipe out the gain you make in the first place."

She adds that her firm believes that inflation is a more real threat in the medium-term than deflation in the UK, with the likely result that interest rates will rise. While this will increase returns in cash terms, if interest rates are below the rate of inflation, the value of your money will fall.

Questions of Cash cannot give individual advice. But if you have a financial dilemma, we'll do our best to help. Please email us at: questionsofcash@independent.co.uk

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