Re­tired ex­pats lose mil­lions to bad ad­vice

The Daily Telegraph - Your Money - - MONEY - Sam Barker

Hun­dreds of ex­pats who re­tired to Spain to en­joy their later years are in­stead fight­ing for pay­outs from a British firm they say badly let them down. Some 750 re­tirees are bring­ing a le­gal claim for around £75m against Old Mu­tual In­ter­na­tional (OMI), part of British-based wealth man­ager Quil­ter, on the grounds that it should not have sold them in­sur­ance bonds in­vested in risky de­riv­a­tives.

More than a dozen con­tacted Tele­graph Money to say they agreed to buy the bonds only be­cause they trusted the Old Mu­tual name and ex­pected some due dili­gence from a com­pany that charged them high fees. Gil­lian Fore­man, 61, in­vested £31,500 in an OMI bond backed by what she thought were low-risk in­vest­ments. In fact, like hun­dreds of oth­ers, her pen­sion was put in “struc­tured notes”, com­plex debt obli­ga­tions linked to the per­for­mance of un­der­ly­ing as­sets, which led to losses cost­ing her thou­sands of pounds.

She said: “My ad­viser told me I was in­vested with OMI and this en­sured my funds would be wisely in­vested. I agreed to go ahead, as OMI is a global com­pany with a good rep­u­ta­tion.”

Louisa Hallewell, an­other in­vestor, said she thought OMI was a kind of guar­an­tee. She claimed her sig­na­ture had been pho­to­copied by her fi­nan­cial ad­viser to put her pen­sion in in­vest­ments meant only for so­phis­ti­cated in­vestors, some­thing she said OMI should have picked up. She said: “OMI didn’t carry out any checks to see if the deal­ing in­struc­tion was in fact car­ried out by me, or in my in­ter­ests as a re­tail pen­sion in­vestor who should not be ex­posed to risk.”

A spokesman for OMI said it had no case to an­swer as, like other com­pa­nies that sell to ex­pats, it merely pro­vides a type of wrap­per to house in­vest­ments cho­sen by in­vestors, via their fi­nan­cial ad­viser. The spokesman said: “Old Mu­tual In­ter­na­tional is not party to dis­cus­sions be­tween pen­sion trustees, their cus­tomers and their fi­nan­cial ad­vis­ers, so we are un­able to com­ment on the ad­vice given and de­ci­sions made on the in­vest­ments cho­sen.”

The High Court re­cently dis­missed a sim­i­lar ar­gu­ment put for­ward by Berke­ley Burke, a provider of self­in­vested per­sonal pen­sions, in­stead giv­ing savers who had been al­lowed to in­vest in risky schemes the go-ahead to chase the com­pany for the losses.

Angie Brooks, of Pen­sion Life, the con­sumer rights group bring­ing the class ac­tion against OMI, said its case was based on the same prin­ci­ple: “Ul­ti­mate re­spon­si­bil­ity rests with OMI be­cause it al­lowed the money to be put in very high-risk in­vest­ments.”

Ms Fore­man and Ms Hallewell, like oth­ers, trans­ferred their pen­sions into OMI bonds on the ad­vice of Con­ti­nen­tal Wealth Man­age­ment (CWM), an Ali­cante-based fi­nan­cial ad­viser. CWM closed its doors last year as the scale of its clients’ pen­sion losses be­gan to emerge. In­vestors ad­mit they were badly ad­vised, but ar­gue that OMI failed in its duty of care to them, paid for with hefty fees.

Ms Fore­man said: “I opted for low risk but found I had been in­vested in these toxic struc­tured notes, things for gam­blers, not pen­sions. I then found £5,000 had gone in fees and com­mis­sions.” Some of this money went to OMI, which then took more when she de­cided to cut her losses.

She said: “When I took out what was left and trans­ferred it to my British em­ployer’s scheme, OMI took £2,500 in exit fees. I have just £11,000 left of my orig­i­nal £31,500. I have com­plained to OMI. I just want my orig­i­nal amount re­in­stated, claimed were undis­closed.

Around 220,000 British cit­i­zens aged 65 and over live in the EU, mostly in Spain. Ex­pat pen­sion­ers are par­tic­u­larly vul­ner­a­ble. Gen­er­ally the com­pa­nies they deal with are out­side the ju­ris­dic­tion of Fi­nan­cial Con­duct Author­ity rules on treat­ing cus­tomers fairly, and they can still pay com­mis­sions to fi­nan­cial ad­vice firms to en­cour­age them to sell their schemes, a prac­tice banned here after mis-sell­ing scan­dals.

OMI is reg­is­tered in the Isle of Man, lead­ing the group of 750 in­vestors to bring their case there.

In a sep­a­rate le­gal ac­tion, an­other in­vestor, Jake Lynch, is pur­su­ing OMI for £150,000 he said he had lost after in­vest­ing a six-fig­ure sum via a dif­fer­ent Span­ish-based ad­viser.

Mr Lynch’s case is sim­i­lar to the oth­ers: that OMI is li­able for his losses be­cause it acted jointly with his ad­viser by pay­ing the lat­ter a com­mis­sion. He fur­ther al­leges that OMI was not au­tho­rised in Spain to ar­range this con­tract, mean­ing it should be void and his losses paid by OMI. The firm said it dis­puted all Mr Lynch’s al­le­ga­tions.

Hopes of lower car in­sur­ance pre­mi­ums for driv­ers who take cy­cling tests have been dashed by in­sur­ers, who say the gov­ern­ment ini­tia­tive will not work.

Last week the De­part­ment for Trans­port (DfT) said it wanted to work with mo­tor in­sur­ers over the next two years to see if they could give lower pre­mi­ums to driv­ers who had proven they were also safe cy­clists.

The the­ory is that if driv­ers take cy­cling tests they will be safer be­hind the wheel and so de­serve lower pre­mi­ums.

A gov­ern­ment doc­u­ment on the is­sue said: “We will seek to in­cen­tivise Bike­abil­ity cy­cle train­ing, work­ing with the mo­tor in­sur­ance sec­tor, to ex­plore op­por­tu­ni­ties to of­fer dis­counts to road users who have passed Bike­abil­ity Level 3.”

These tests train cy­clists to be safer, teach­ing bet­ter road po­si­tion­ing and how to spot haz­ards.

But the As­so­ci­a­tion of British In­sur­ers (ABI) said the idea would not lead to a mean­ing­ful fall in car in­sur­ance prices.

A spokesman said: “There have been no dis­cus­sions be­tween the ABI and the Gov­ern­ment on any pro­pos­als around mo­tor in­sur­ance pre­mi­ums and its Bike­abil­ity train­ing scheme.

“In­sur­ers sup­port im­proved road safety, but in 2017 fewer than 0.1pc of mo­tor claims in­volved cy­clists, so it is hard to see how this could have any mean­ing­ful im­pact on pre­mi­ums.”

The Gov­ern­ment wants car driv­ers and own­ers of com­mer­cial ve­hi­cles to ben­e­fit from the lower pre­mi­ums. It also wants to en­cour­age in­sur­ers to of­fer lower pre­mi­ums for cy­clists who take the tests.

The pro­pos­als are part of a larger DfT plan to im­prove road safety, cut obe­sity and lower pol­lu­tion lev­els.

Jesse Nor­man, the trans­port min­is­ter, said: “That means more sup­port for cy­cling and walk­ing, and that’s what these new mea­sures are de­signed to de­liver.”

The mea­sures in­clude a re­view of the High­way Code and the set­ting up of a po­lice unit to mon­i­tor video footage and spot ex­am­ples of dan­ger­ous road use.

Re­tir­ing to re­lax in the sun sounds idyl­lic, but dan­ger lurks for pen­sion­ers – even with fa­mil­iar com­pa­nies, finds Laura Miller ‘My ad­viser said I was safe be­cause I was in­vest­ing through Old Mu­tual’

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