Retired expats lose millions to bad advice

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’