Home income victims get another 20m pounds: Compensation scheme fears it will have to reopen every case

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The Independent Online
AN APPEAL Court decision yesterday will give 2,000 buyers of home income plans an extra pounds 20m from the Investors Compensation Scheme, but the ICS said the judgment meant it would have to reopen every case it had considered since it was set up in 1988.

The ICS has already paid pounds 22m to mostly elderly investors who were given bad advice to buy home income plans by firms of independent financial advisers which subsequently went out of business.

The plans, under which home- owners took out a mortgage to release income from the capital tied up in the bricks and mortar, flourished between 1987 and 1990. Falling house prices and rising interest rates made them a disastrous investment. As many as 10,000 could have been sold.

The ICS had deducted from the compensation it awarded the sums that investors had withdrawn from their capital and spent. It argued that it had to exercise judgement about what would be the fairest decision for all investors involved.

Investors bringing the appeal said many of them still had big mortgages they had not had before and could not afford to service. The compensation should return them to their financial position before taking out the plans.

Norman Murrell, who bought a home income plan from the defunct financial adviser Fisher Prew-Smith in 1989, still has a pounds 16,000 mortgage with West Bromwich Building Society after using the compensation received so far to pay off part of the debt. Mr Murrell, due to retire yesterday, said he would have to continue working part-time unless he could repay the rest.

The Appeal Court ruled that investors should be paid what they could have expected to win in the courts if their financial adviser had not gone out of business, and agreed that the amount of compensation should equal their whole mortgage debt.

Lord Justice Rose refused the ICS leave to appeal to the Lords. However, it is likely to petition to appeal because of the implications of yesterday's judgment. A spokesman said it implied that it could not look at classes of cases but would have to assess every individual claim as if it were a court of law - unlike any other ombudsman or compensation scheme.

This would mean reopening the 6,700 claims it had dealt with, and would make future claims slower and more expensive.

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