Yorkshire BS Protected Capital Account - question

AlwaysHappy

My mother (79) has just converted her isa into this account, having been offered a coffee by the adviser. She doesn't understand it..... she said the girl was very helpful though. It effectively ties her funds up for 5 years and now that I have asked her to send the paperwork to me I am concerned that it quotes "Early encashment of the plan will result in an early exit fee (including in the event of death) and so you will get back less than you initially invested.
I phoned the adviser today and asked how much the exit fee was and she said she didn't know, nor was it in any paperwork as it may not happen, surely that can't be correct - can it? She said nobody had asked about it and had never been in their paperwork.
Am I missing the point - I thought the FSA regulations and Banking code of practice asked for clarity.
Can anyone advise, Thanks.

dunstonh

It effectively ties her funds up for 5 years

I think they are 6 years, not 5 on their current range.

(including in the event of death)

Not strictly true. It can continue in place with the beneficiary taking ownership. Only if the executor chooses to surrender it will a fee and possible lower value apply.

I phoned the adviser today and asked how much the exit fee was and she said she didn't know, nor was it in any paperwork as it may not happen, surely that can't be correct - can it?

That is correct. The value is based on the underlying value of the investments used to underwrite the plan. The guarantee is only applicable at maturity. So, in between start and maturity, the value could drop significantly.

The fee,on top of that, is based on the investor paying all fees that would have had to be paid until maturity by the provider. So, they cant really put an exact figure on it as it would depend on where it is in the cycle. However, a fair guide based on their T&C is something around 10% in the early years falling by about 2% per year in steps (i.e. 10,8,6,4,2,0). Thats higher than normal but this product is a higher commission payer at 4% so that would be the minimum fee that would have to be considered before the rest.

She said nobody had asked about it and had never been in their paperwork.

Quite normal. Bank sales staff are low skilled and the typical bank customer buying bank investment products is low knowledge. So, questions like that are often not considered.

Am I missing the point - I thought the FSA regulations and Banking code of practice asked for clarity.

Banking code doesnt apply as its not a banking product. Indeed, banking code doesnt exist any more I believe. FSA regulations cover disclosure and its in their documentation. However, with investments its often difficult to give explicit fees.

My mother (79) has just converted her isa into this account

I'm assuming that she isnt an experienced investor (if she was she wouldnt have bought this awful product). So, what is she doing at age 79 buying an inflexible product like this? The terms are pretty poor & the tie in is strict and not open ended. she ought to consider excercising her cancellation rights.

AlwaysHappy

Wow thanks very much dunstonh for the comprehensive insight into this. I phoned the Head Office and when I asked what the exit fee was, was told if I was asking the question it was probably not the right product. I wouldn't even say my Mum is an inexperienced investor, she isn't an investor at all, she is a saver. When I asked her why she had taken it, she said it was because the girl had made her a coffee....... says it all!! Thank goodness for the 14 day cool off period.

Mikeyorks

AlwaysHappy wrote: »

she said it was because the girl had made her a coffee

Bless Don't you just love them!

But at least she's more adventurous than mine - who insisted on keeping money in a Halifax Liquid Gold that was paying around 0.1% - at a time rates were much better than currently.

More seriously - try to get at them before, hopefully, the money is lifted out of the ISA, as you can't put it back in beyond the current year allowance if there is (was) more in it than £5100. Although - from the fact you have the papers - sounds too late?

AlwaysHappy

Mikeyorks wrote: »

Bless Don't you just love them!



More seriously - try to get at them before, hopefully, the money is lifted out of the ISA, as you can't put it back in beyond the current year allowance if there is (was) more in it than £5100. Although - from the fact you have the papers - sounds too late?

I think its still in the ISA wrapper and hopefully all can be rectified, hence the 14 day cool off period - or there will be trouble!!

JamesU

AlwaysHappy wrote: »

I think its still in the ISA wrapper and hopefully all can be rectified, hence the 14 day cool off period - or there will be trouble!!

I read this yesterday and was preparing to suggest the 14 day cooling off period prior to Dunstonh's reply.

Annoyed to hear about this scenario, having experienced the same YBS procedures with family......nice little areas set up for the pre-investment coffee and chat in branch etc really infuriating.

But as MikeyWorks has mentioned, worth checking if you can maintain the ISA status after cancellation. According to the investment details for the 6yr product on YBS, deadline for transfer of cash ISA money into the 6yr PCA is 6th May, for new ISA money until 13th May, and the money is not invested until 7th June. So given these dates, hopefully a reasonable argument can be made to YBS to maintain the ISA status of the cash after cancelling, given this is prior to closure of the PCA to applications and also the investment start date in June. Definitely worth a try.

Good luck with this.

JamesU

AlwaysHappy

JamesU wrote: »

I read this yesterday and was preparing to suggest the 14 day cooling off period prior to Dunstonh's reply.

Annoyed to hear about this scenario, having experienced the same YBS procedures with family......nice little areas set up for the pre-investment coffee and chat in branch etc really infuriating.

But as MikeyWorks has mentioned, worth checking if you can maintain the ISA status after cancellation. According to the investment details for the 6yr product on YBS, deadline for transfer of cash ISA money into the 6yr PCA is 6th May, for new ISA money until 13th May, and the money is not invested until 7th June. So given these dates, hopefully a reasonable argument can be made to YBS to maintain the ISA status of the cash after cancelling, given this is prior to closure of the PCA to applications and also the investment start date in June. Definitely worth a try.

Thanks James, they sent me a copy of the conditions yesterday and I couldn't believe when it said that if it was ISA moneys, effectively if you changed your mind you would lose your ISA status forever. I will phone my Mother today and tell her to hot foot it down to the bsoc in the morning (she won't want to do that as the fair is in town........). The decision had been made to cancel it, but Mum won't want to lose the tax free bit (even though if you asked her what that meant she wouldn't know), but I am furious about this.

dunstonh

Cancellation rights does normally cancel the ISA bit allowing you to take out an ISA elsewhere. Its if it goes past the cancellation rights period that you have the problem.

JamesU

AlwaysHappy wrote: »

JamesU wrote: »

Thanks James, they sent me a copy of the conditions yesterday and I couldn't believe when it said that if it was ISA moneys, effectively if you changed your mind you would lose your ISA status forever. I will phone my Mother today and tell her to hot foot it down to the bsoc in the morning (she won't want to do that as the fair is in town........). The decision had been made to cancel it, but Mum won't want to lose the tax free bit (even though if you asked her what that meant she wouldn't know), but I am furious about this.

More info as above from Dunstonh here and it looks like this may be cancelled with retention of ISA status too. Based on your reply, seems it is not practical for you to go with your Mum in branch to argue the case. If so, depending on how easily your Mum can handle the YBS reps verbally, might be a good idea to have the reasoning for closure and maintenance of ISA status from posts above written on paper to recite in branch? Not trying to overdo it here, but from my own experience this is how it has to be done sometimes, you can obviously decide on this better with your Mum according to circumstances.

Good luck with this, and hoping for a satisfactory conclusion.

JamesU