Whole of life insurance mis- sold or not?

dunstonh

So yes we did approach them about that, but we did not approach them about life insurance.

When giving advice, there are two types. Focused (or limited) and full. Advisers are required to open up the review to full basis but you are allowed to close it off and say you only want to deal in your chosen area.

In this case, the adviser mentioned life assurance and you agreed to have advice in that area. So, the correct process appears to have taken place.

In respect of the advice, the adviser is required to carry out a shortfall analysis which looks at your needs and objectives and then recommend a solution that fits those. If that is constrained by budget, then a further recommendation is made based on that budget.

From the figures you have given in your post, you clearly had a need for life assurance as you only had a bit more than your mortgage and 4x DIS on one of you and short history on a pension. A proper analysis would give a more accurate figure but a crude guide is that 10x your income is the sort of ballpark that you would be looking at. With a disabled daughter, you would probably need more than 10x but as I said, its a crude guide.

even if my wife dies first and my other children avoid inheritence tax, once the money is paid out, it comes out of trust, therefore my disabled daughter would still have capital in excess of what she would be allowed under benefit rules and would have to pay for all her living costs and her day services out of it, until it was depleted to a point where they would start giving her money to live on again.

The problem with that is that you seem to be saying that you would rather she lives on the breadline with benefits under a benefit system that is frequently changed under legislation.

You need to look back at your situation at point of sale and think through the consequences if one (or both) of you died. What would have been the sequence of events that followed that with no income coming in, only 4x DIS and the mortgage paid off with hardly any pension entitlement built up.

Could your spouse/daughter lived for 20-30-40 years with the lump sum paid out on the death in service? no.

So, whilst no-one here can say what exactly you needed financially, it is clear that you did have a financial need for life assurance and you did agree for advice in that area. The product is obsolete but then so many other things you bought 20 years ago would be now too. This is why you need to keep financial products under review in the same way you would any other retail product.

daviddee

Thank for explaining that.

I think taking what you have said into consideration, it's probably not going to fall into any Mis sold area, so perhaps it's best just to cancel the policy and get back the amount left in plan.

magpiecottage

I would just make a couple of comments.

dunstonh is correct that advisers should look at the wider context. After all, they are supposedly experts with wider knowledge.

That said, with this type of policy, they should ensure you understand that the premium is likely to increase very substantially to maintain cover if you choose the maximum level.

As far as the policy proceeds effectively subsidising the state is concerned, if it is in trust that should not happen.

Firstly, assumining the policy is set up so that you cannot benefit from it then Inheritance Tax should be avoided.

Then, the proceeds of a claim would legally belong to the surviving trustees, not your daughter.

There is case law which says that if all current and potential beneficiaries agree, the trust can be wound up immediately. In theory, a local authority with responsibility to care for a beneficiary could force them to exercise that right. However, the right is not available to those who are not "of capacity".

As a child, your daughter would not be of capacity. As an adult, her learning disability might prevent her from being but might not.

The usual way to get round this is to give the trustees discretion over whom they appoint as a beneficiary in a way that it will always be possible for that to be a child (possibly one not born when the trust is set up). That way you can never get the consent of all potential beneficiaries.