Missold Insurance/Endowment Policy

wryneck · 22 June 2018 at 9:19AM

I am currently claiming against an insurance company for mis-selling me an endowment policy that was non-qualifying for tax purposes thus I am faced with a tax bill upon maturity. The policy was taken out in joint names but was later transferred to my single name 20 years ago. The financial ombudsman have said that the other person who was originally on the policy is an "eligible claimant" and therefore needs to be involved in the claim. I have not had contact with the person for over 20 years and have no knowledge of their whereabouts now. This seems a very unreasonable request but I would be interested to receive any guidance.
Thank you

[Deleted User] · 22 June 2018 at 9:23AM

I'm afraid it's not "unreasonable" otherwise it would be equally unreasonable to make a complaint about decades old finance!

So it looks like you'll have to find the original joint holder if you want to advance this any further.

I'm certain others will be along to comment on the likely failure of an endowment complaint shortly..

dunstonh · 22 June 2018 at 11:10AM

I am currently claiming against an insurance company for mis-selling me an endowment policy that was non-qualifying for tax purposes thus I am faced with a tax bill upon maturity.

That is a complaint that you would not expect to succeed.

If the seller was an IFA then you would probably have a chance (as IFAs have to give best advice). However, its highly unlikely it was an IFA as the main companies that had non-qualifying policies were a few tied sales forces. Plus, you say you are complaining to the insurance company. You wouldnt be doing that if it was an IFA.

Tied salesforces can only sell their own product. That is their regulatory remit. So, if their product is non-qualifying then that is the product they sell. If they had no qualifying policy available they couldnt sell a qualifying policy. It is a bit like going into an Apple store, buying an iphone and then 20 years later complaining that they didnt sell you an Android phone that was better.

This seems a very unreasonable request but I would be interested to receive any guidance.

It is logical and understandable.

a) if the complaint was upheld, the other person would be entitled to 50% of the redress or the redress would be reduced by 50% (if the other person is a basic rate taxpayer and the gain after top slicing relief doesnt take them into higher rate).
b) the other person was party to the contract and may have useful information or evidence.
c) the size of redress in an uphold complaint cannot be calculated without them.

thus I am faced with a tax bill upon maturity.

How much is that tax bill?
are you higher rate taxpayer? If not, have you applied for top slicing relief and does the chargeable gain take you into higher rate tax?

If the policy is still in force, you could assign it to a spouse/partner who is non/basic rate taxpayer.

wryneck · 22 June 2018 at 3:40PM

Thank you for the quick replies and advice. The seller was an insurance company, not an IFA. The transfer into to single name meant that all rights to benefits were transferred so there is no benefit to the other party regardless of the outcome. As far as I am aware they would not be entitled to any redress. But I appreciate they may have information or evidence from when the policy was taken out.
Yes I am a higher rate tax payer and the tax payable is just over £4,000. If I had been aware that the gains were taxable I would have either cashed in the policy or started saving to allow for the tax.
Unfortunately the policy is no longer in force so I cannot assign it elsewhere.

Any further advice would be appreciated of course.
Thanks

[Deleted User] · 22 June 2018 at 3:56PM

wryneck wrote: »

The transfer into to single name meant that all rights to benefits were transferred so there is no benefit to the other party regardless of the outcome. As far as I am aware they would not be entitled to any redress.

You've already stated that FOS thinks otherwise;

wryneck wrote: »

The financial ombudsman have said that the other person who was originally on the policy is an "eligible claimant"

Why is FOS involved at this (early) stage? Has this complaint already been rejected and the Ombudsman now adjudicating?

wryneck · 22 June 2018 at 4:02PM

The FOS agrees that the rights to benefits and risks were transferred but the right to complain was not. That is why they have asked me to contact the other party to get their consent to complain.

My complaint to the insurance company at maturity was rejected, hence I then took my complaint to the FOS.

Thanks

wryneck · 22 June 2018 at 4:06PM

I should add that the policy only matured recently (2017) and that it was only upon maturity that I was told about the tax status of the policy. That is why I complained.

[Deleted User] · 22 June 2018 at 4:06PM

wryneck wrote: »

My complaint to the insurance company at maturity was rejected, hence I then took my complaint to the FOS.

For reasons already pointed out by Dunston, rejection was to be expected.

I doubt the Ombudsman will rule in your favour, to be honest.

kingstreet · 22 June 2018 at 4:16PM

Was the plan always non-qualifying, or did it lose qualifying status following the alteration?

dunstonh · 22 June 2018 at 4:46PM

The transfer into to single name meant that all rights to benefits were transferred so there is no benefit to the other party regardless of the outcome. As far as I am aware they would not be entitled to any redress.

It is unlikely they would get any redress. However, the complaint is about the situation as it was at point of sale. If the other party does not have a chargeable gain for higher rate tax, then you would expect (if the complaint was upheld) to only receive 50% of amount.

Yes I am a higher rate tax payer and the tax payable is just over £4,000. If I had been aware that the gains were taxable I would have either cashed in the policy or started saving to allow for the tax.

A surrender is a chargeable event. So, that would not have avoided it. However, assignment to a basic rate taxpayer would.

I should add that the policy only matured recently (2017) and that it was only upon maturity that I was told about the tax status of the policy.

The key features documents issued back in the 90s did state the tax positions.

Missold Insurance/Endowment Policy

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