Appalling service from Clerical medical!

TUVOK

I am posting to give a final update on my long running saga with Clerical Medical (now trading as Scottish Widows) which is now concluded thankfully.
I  received a payment of £200-00 last year after registering a complaint with their complaints department, I have in March of this year received another payment for £229.46 for continued problems in dealing with Scottish Widows, this last payment includes interest for myself not receiving the with drawl I requested.
The Financial Ombudsman investigated my complaint and decided that due to the payments that I had received, they would take no further action.
Many members reading my post will believe that I have done very well with compensation, which is fair comment.
Regardless of the compensation I would not wish myself or any one else to go through the very long protracted dispute with Clerical Medical, it was costly in repeated telephone calls, time waisted for over a hour many many times waiting without any success for a answer.
It also required a great deal of perseverance on my part for month after month to continue to try to get my payment.
I conclude by advising that no one contemplates having any business with Clerical Medical.

My thanks to the members who replied to my post, their help is much appreciated by myself. 

dunstonh

I conclude by advising that no one contemplates having any business with Clerical Medical.

And as has been said, Clerical Medical are not open for new business.    Their administration and servicing was transferred to Scottish Widows.     

 I have in March of this year received another payment for £229.46 for continued problems in dealing with Scottish Widows

With that figure not being rounded, it looks like a unit price adjustment.  i.e. the difference between what you got and what you should have got if done at the correct time.   So, the £200 earlier figure would be the goodwill gesture.

The Financial Ombudsman investigated my complaint and decided that due to the payments that I had received, they would take no further action.

With the corrected unit price and a goodwill figure, the FOS have no reason to look at your complaint further.  The outcome is in line with the expectation in this sort of thing.

TUVOK

Help please again with Clerical Medical.
Following on from my nightmare experience re my with drawl request and what happened before I obtained the payment, I've received an advice letter from C/Medical re taxation on the payment. 

I have made a with drawl annually for several years, always asking that the amount that I with draw is not liable to taxation.
C/Medical have in the past advised me what amount that can be, I have never paid tax on these amounts or been advised by them that I should do.
I asked for the same arrangement re non taxable amount for the last with drawl, but the letter that I have now received states that I am liable for a 20% taxation amount, i.e £200-00 on the with drawl of £1000.00

Can any one clarify what my situation is on this matter.

Thanks for any/all replies

dunstonh

I have made a with drawl annually for several years, always asking that the amount that I with draw is not liable to taxation.
C/Medical have in the past advised me what amount that can be, I have never paid tax on these amounts or been advised by them that I should do.
I asked for the same arrangement re non taxable amount for the last with drawl, but the letter that I have now received states that I am liable for a 20% taxation amount, i.e £200-00 on the with drawl of £1000.00

Does it state you are liable for 20% or does it say it is treated as 20% having been paid? 
i.e. if it's an onshore investment bond, it is taxed internally to equate to basic rate tax.

TUVOK

The letter "states their understanding of the matter"

Relevant points are:
The nature of the event was withdrawl (excess event) Although I clearly asked that the withdrawl amount should not incur taxation.
They write, please note that tax has been treated as paid on the gain shown on the attached sheet and while this tax cannot be repaid, should you need to complete a tax repayment claim, you will also need the following information, the amount of tax treated as paid on the gain is £200-00"

I'm not sure if it is a off shore investment bond (it's a C/Medical Distribution Accumulation  S2 bond)

I calculate that I'm looking at about £40-00 tax to pay (£200-00 @ 20% = £40-00)
Not worth seeking professional help, but any insight you can give would be most appreciated.

I know from recent experience that even trying to speak to some one at C/Medical is impossible, I'm totally fed up with the bond, but of course I'm looking at a 20% tax if I close it, hope that I've understood that position correctly.
I'm not even sure that the bond is even a market leader.

dunstonh

The nature of the event was withdrawl (excess event) Although I clearly asked that the withdrawl amount should not incur taxation.

Onshore investment bonds have never been tax free.    So, you would expect taxation to have been mentioned on any other previous withdrawals that resulted in the surrender of policy segments or if you had exceeded the 5% deferral allowance.

I'm not sure if it is a off shore investment bond (it's a C/Medical Distribution Accumulation  S2 bond)

Offshore is clerical medical international.  Onshore is just Clerical Medical.

I calculate that I'm looking at about £40-00 tax to pay (£200-00 @ 20% = £40-00)
Not worth seeking professional help, but any insight you can give would be most appreciated.

Only if the chargeable gain takes you wholly into the higher rate band.  You would need to be earning damned near or over the higher rate band to suffer tax if that is the figure involved.

If you haven't had a chargeable gain before, then this would suggest you have not sold any policy segments previously and its been using the 5% deferral method.

I'm not even sure that the bond is even a market leader.

Clerical medical bonds stopped being retailed around 2009 (give or take). Lloyds bank decided to retire the Clerical medical brand at that time for new business and consolidate the servicing with Scottish Widows.   They continued with the SW bond in its place but in my opinion, the Clerical Medical bond was the better one of the two.

When the taxation on dividends was changed, investment bonds went out of fashion because the new dividend taxation pushed unwrapped UT/OEICs ahead of the investment bond in most scenarios.   So, nowadays, you only tend to see onshore investment bonds as older products past their best.    For new business in the tiny niche where they are still used, tend to favour offshore bonds.  There are some caveats to that.   The old Pru WP onshore bonds from the late 90s to early 2000s are just great.   Unfashionable to many but it was the one WP fund that does the job and the charges back then were low compared to their later versions and much better than their current offering.

Distribution funds have been off the boil for most of the period after the credit crunch.   The cycle just didn't favour equity income.  Although bonds/gilts did far better than long term average in that period.

You should investigate exit and compare with modern options if tax makes it viable to do so.  Remember the internal taxation of an onshore bond is between 13-18% p.a. depending on the underlying assets.    You may not pay it personally but it is within the bond and that reduces your returns.   

TUVOK

I'm very grateful for your full and very detailed reply, it's a great help in clarifying the problem that I have with this matter.
I'll now digest your answer more fully.

TUVOK

Thank you again for your help, it has clarified my problem.
I have decided to declare the £200-00 to HMRC, I have just completed my declaration successfully.

I will have to ensure that if I keep the bond? I am absolutely sure that C/Medical do not make the same mistake again. I categorically asked them not to make a payment that took me into paying tax.
I'm not sure exactly what is happening with them as I have asked for this annual with drawl for a number of years with no tax liability, this has been done without any problem, but this year,Yes!  

Next step is to research a closure and what that entails?

dunstonh

 I categorically asked them not to make a payment that took me into paying tax.

This surprises me.  Providers normally go out of their way to carrying out transactions where the individual has placed an instruction what is classified as advice.   To follow out your instruction, they would need to know your income (including interest and dividends).      Sometimes providers will do a comparison of the two methods and will often default to the deferment allowance method even if it is not the best method when your wider circumstances are taken into account.    

I have an annual discussion with a provider who tells me that the deferment method is more tax efficient and I have to tell them it's not because I know the whole scenario and they don't (in that case, there is nil rate band, PSA and dividends in the equation which the provider knows nothing about).

I'm not sure exactly what is happening with them as I have asked for this annual with drawl for a number of years with no tax liability, this has been done without any problem, but this year,Yes!  

My guess is that previous withdrawals have been within the annual 5% deferment allowance.    This one wasn't.   It could be that you have no deferment allowance left.   When did you take this bond out?       Was the amount drawn over 5% of the initial investment?

TUVOK

Due to the state of C/Medicals response status, impossible to get through and actually speak to some one, so instruction given via email.
I'm afraid that due to the terrible state that C/Medical were in, every thing became totally disjointed, never being able for long periods to speak to any one and explore options etc, then differing people who were never up to date on the situation, it all became a absolute night mare experience, thus my comment in an earlier reply about closing the bond and never having to deal with them again.
 
I took the bond out in 2001 and have made approximately 5 with drawls.

I read yesterday an article from a tax accountant, excellent article, but I will need professional help I believe to determine re closing it, hopefully can couple that with advice on IHT which I badly need to get in order.