Building societies pay out to customers hit by failed investments

Three major building societies have agreed to pay millions to customers after introducing them to tax schemes that led many to lose their life savings.

Leeds, Newcastle and Nottingham building societies have announced that they will reimburse the over 2,000 customers who placed money into now-failed trusts while on their premises. The compensation will amount to most of the £44m lost.

The customers were introduced to an estate management company called the Family Trust Corporation between 2005 and

2018. The firm encouraged savers to put their money in trusts to save on inheritance tax and care home fees. Building societies earned up to 20pc commission of product fees.

But in 2018, the Family Trust Corporation ceased trading and the Philips Trust Corporation took over. Customers’ money was pulled from sound investments and put into new vehicles that loaned money to, among other entities, a sausage shop and a scaffolding firm – all of which later defaulted. Philips Trust went bust in April 2022.

Richard Fearon, chief executive of Leeds, said that the consequences of the failed investments were “serious”. Around a quarter of the £44m lost will come from Leeds, which made a £181m profit last year and holds capital and reserves of over £1bn.

Mr Fearon added: “It became clear this year that investments were defaulting. It looked like the defaults were going to be very serious in terms of the shortfalls. This is a strong financial offer that the three of us are making. There is no regulatory or legal obligation for us to do this. It is voluntary.”

Mary Ledgard, mother of John and David Ledgard, was introduced to Family Trust’s umbrella firm, Estate Planning Group, by a clerk at her Leeds Building Society branch in 2014.

Ms Ledgard died in May 2021. By November that year her house had sold for £180,000. Her two sons have not seen any of this after Philips Trust transferred sale proceeds to a different customer. Mr Fearon confirmed that the brothers will now be compensated the full £180,000 by Leeds.

David Compston, who has been representing the brothers, said: “His longterm partner has been on dialysis at home. She’s been working full-time, but this means she can now go down to two days a week. It’s life-changing.”