Advice Please- Scottish Provident Int'l Savings

Gazza68

Could anybody please advise or provide comment on my best action(s) to take (if any)?
Just received my annual statement from Scottish Provident Int'l today, and completely shocked as to the value of my so called 'managed flexi-growth' savings investment.
In 1995 I took out a savings investment account with them for a period of 15 years, but a few months later I realised I was misinformed (or rather 'conned') by there representative. The only way not to loose what I had already given them (at that stage +- £5,000) was to give them more money - as the 'cooling off' period had already lapsed. Scottish Provident wanted another £2,500 to bring it up £7,500 and would classify it as a one off savings investment. Fast-forward 13 years to today, and the total value is not even worth £2,400 (not including any penalties should I cancel it). The most irritating part is that Scottish Provident, through the years have taken over £6,000 in fees!!!!! (almost a £1,000 last year alone). If I had put the original £7,500 in a normal bank savings account at 5% interest, compounded over the years, I'd be looking at a nice figure of around £17,000 at the end of 2010.
My questions are :-
1) Is this ethical?
2) Can I take this matter to the financial ombudsman?
I am really REALLY angry, since when do people get rewarded for performing badly? If you performed this badly at your job, you'd certainly be fired!
Look forward to any feedback
Thanks in advance

opinions4u

You can pursue a complaint either with the people who sold you the plan or the life company. If not happy with the outcome, it is your perogative to take it to the Ombudsman.

What you need to show is that their reasons for selling you the plan were flawed and the advice was inappropriate for your circumstances at the time.

Poor investment performance and high charges cannot, however, be challenged - unless you can show that you weren't told it was an investment or there was no explanation of charges.

dunstonh

1) Is this ethical?

Yes.

2) Can I take this matter to the financial ombudsman?

on what grounds? Investment returns are not something you can complain about.

You took out an investment of medium risk. 1995 would have had quite a few risk warnings plastered on it in a number of places. Things like "the value of your investment can go down as well as up", "you may not get back what you have paid in". The illustration rates in 1995 would have shown three examples. The lowest of which would have shown very little growth.

However, I think your problem here is part misunderstanding and part failure to act correctly at the time.

The drop of £1000 is almost certainly not fees. It will either be a drop in value due to the investment fund going down in value (with the stockmarket and property suffering by 20% that seems about right). Or, you did not cancel the life assurance element that may have been on the plan and they continued to take this from the investment element. (or a combination of the two).

When you made the plan paid up, you need to specify, if there is life assurance, if the life assurance element should continue or not.

Also, back in 1995, plan charges were far higher on regular payment plans. So the first 18-24 months premiums would have gone on charges. You probably couldnt make it paid up until a certain amount had been paid in and that is probably what the extra money was for. So, you probably paid the charges as if a regular contribution was being paid which would account for your low value.

You could have a little scope for complaint if you used an IFA but you say it was a tied rep. That hampers you a bit because they only have a remit to tell you the options you have available to you on that plan. If they told you that you could pay enough in to make it paid up then it is techncially correct. If you went direct to Scot Prov to ask that then you bypassed the adviser so they wouldnt tell you the best option. Just the options you have. If you then make a choice based on those options then you take responsibility. If you sought advice on those options from an IFA or the tied rep then they take responsibility.

Out of interest, how much were you paying in? I dont follow your figures in that you said you only paid in a few months but at that point had contributed over £5000. Thats a lot to pay in on a regular contract for just a few months.

Gazza68

Thanks Dunston, Appreciate your comments and time. I’ll try to elaborate a bit more, and please excuse my ignorance in some cases - I'm not in the finance industry. Apologies too for the lengthy content.
I was working in Malaysia at the time, when a local rep (a Brit) from PIC Malaysia in KL approached a number of employees from a number of expat firms (guess it was rich pickings for him). My wife and I met up with him, the account with Scot Prov was discussed in detail, with key elements being a savings plan, monthly payment into the account, could withdraw money when needed, option to take payment holidays - it all sounded really great (we even took up his offer to open an account for us with Barclays in the Isle of Man). There was no life assurance element, and it was by our understanding a flexible savings account (the product was actually called Quantum Flexi-Growth).
We agreed to pay £750 a month and signed up, happy knowing that we were putting a substantial amount away each month. We also felt very safe with that decision as a number of other expats had signed up too. We weren’t always in KL all the time, sometimes travelling away to other regions for months at a time, before returning to a pile of post and catching up on news with colleagues. While paying this £750 each month, it was only when I returned to KL a few months later that I received all the documentation from Scot Prov/PIC - it was +-20 policy like documents. We initially thought this to be very strange and contacted the rep, who re-assured us that this is normal, not to worry, the 20 odd documents are a tax requirement, and each document is restricted to a certain amount, and that reflected the total amount we agreed to pay monthly. Thought nothing more of it until I heard later that an American expat had approached PIC, specifically the rep, accusing him/them of fraudulent activity. That obviously started my own alarm bells ringing, and discovered that the rep did a runner to Vietnam. Its now 7 months later, rep has disappeared, and we've signed up to something that was not what it is supposed to be. Tried to get it cancelled and our payments refunded, but that was obviously not possible now. Totally peeved off, we wrote to both PIC and Scot Prov, and that is when we discovered that we'd loose everything if payments ceased, and the only way to 'save' what we had paid in so far was to increase the balance in the account to their minimum of £7,500 and go an a permanent 'payment holiday'.(Apologies for the incorrect figures in my earlier email, we had paid 7 months of £750 = £5,250, and subsequently paid in another lump sum of £2,250 to bring it up to £7,500).
Advised Scot Prov and PIC, that we no longer wanted to deal with PIC, and for Scot Prov to correspond directly with us - which they have been doing ever since. At that stage we thought we had made the best of a bad situation, and at least our initial £7,500 was safe for the remaining part of the 15 years. Then we started getting annual statements, and in 1998 we received a letter from Scot Prov saying that they were terminating the GBP Quantum Flexi Growth, and they recommended we move to their USD Balance Managed Fund. That's when we realised it was a stocks and shares investment fund - but not much we could do now anyway. The rest they say is history....

dunstonh

Thanks for the update.

Problem you are going to have with any complaint is that you were not UK resident at the time and not protected by the same rules that are in place for UK residents. You also have no protection under the FOS.

A big generalisation here but it was commonplace back then for advisers that were unable to pass the incoming qualifications or who got dismissed to go abroad and sell products to ex pats. none of the UK requirements existed so they could more or less do what they wanted.

It was normal for these reps not to be tied to one offshore insurer (as polarisation rules in the UK had no impact outside of UK). If that is the case then Scot Prov have no liability either as they just took instructions from you or the rep.

I believe the problem is the high charges in the early years wiped out a good chunk of your £750pm and by the time you increased it and made it paid up, you were already in a significant loss position. The problem almost certainly goes back to then.

It wouldnt surprise me to hear you were told all sorts of rubbish and lies to get you to sign up but as you were not in the UK there is nothing you can do about it now. The contract is awful by todays standards (probably fairly out of date by 95) but this is all hindsight. I fear you will have to put this one down to experience and remember for the future that when buying financial products, it is worth buying them within the UK to make sure you get UK standards and UK protection.

Gazza68

Thanks again Dunston. Understand things a bit better now. As you say I'll chalk this one up as experience. But who knows, maybe the USD recovers in the next 2years!... Cheers again