Funds have failed, but I’m still charged fees

B.K.writes: When we retired, my wife and I set up an investment bond with Skandia, which became Old Mutual. Our adviser persuaded us to redeem a long-term property investment. He then reinvested so our bond contained four new property fund holdings. This proved catastrophic. The four funds were closed and have remained so since about 2009, but Old Mutual continues to charge quarterly fees.

YOU were badly advised. You wanted stable, low-risk investments. Instead, you were steered into high-risk property funds. The assets slumped in the financial crisis and the funds had no cash to redeem your investment, even at a loss.

This was not the fault of Old Mutual International, the Isle of Man company that provided the bond. This was like an empty envelope, into which you and your adviser could put whatever funds you chose. Your adviser, who was based outside Britain, has gone out of business, so cannot be pursued.

But this has left you with the problem of Old Mutual’s fees for maintaining a bond that now holds only the four failed funds. I asked the company to see what it could do for you, and a director told me: ‘We greatly sympathise with the situation Mr K is in.’

The result is that Old Mutual will take over ownership of the failed funds and accept the risk that the funds may never pay out. Not only will you face no further fees, but as a gesture of goodwill, Old Mutual will refund some charges you have paid. You have agreed to this and say you are ‘very pleased’ with the deal. Excellent.