‘We lost £105,000 of savings in a trust – our disabled son will suffer’

Thousands have lost money in tax schemes they claim were promoted by building societies, writes Ruby Hinchliffe

When Kathleen Birtley went into her building society 10 years ago to renew her passbook, she wasn’t expecting to walk out with a noose around her life savings.

A Newcastle Building Society clerk took the opportunity to approach the newly widowed mother and tell her she should think about putting her home and savings into trust, after discovering she already had a will.

“In the event that you go into care, this will ring-fence your assets and keep them safe for your disabled son,” she recalls hearing.

Ms Birtley, then in her early 70s and living in a Northumberland village on Hadrian’s Wall, claims she was introduced to her “money manager” , a financial adviser on commission, though the fee was not linked to any assets placed into trust.

The adviser delivered a spiel on trusts, an unregulated financial product, charging £600 for his time.

She agreed, not realising that they would soon hand her over to totally separate third parties called the Will Writing Company and Family Trust Corporation in return for 15pc of all fees they charged.

Just two months later, Ms Birtley set up an investment fund in trust to be held by Family Trust, alongside her home. She then began pouring her life savings – some £105,000 – into it.

But in late 2018, the Will Writing Company and Family Trust announced plans to shut down and her money was reassigned to another third-party, Philips Trust Corporation.

Shortly after the takeover began, Newcastle Building Society wrote to her in a letter seen by The Telegraph with reassurances that there was “no risk” to her property and assets.

In the months that followed, Philips Trust cashed in her investment plan, extracted her money and spread it across bonds which would later default and leave her with nothing.

Some £138m belonging to 2,345 building society customers was tied up in Philips Trust when it went into administration in April 2022.

Other building societies whose customers say they were caught up in the scandal include Leeds, Nottingham, Cambridge, Saffron, Marsden, Hanley Economic, Vernon, Melton Mowbray and Dudley, according to solicitor Claire Springle, who has been helping victims.

About £44m was investments, and the rest was property. While some customers have been able to pay thousands of pounds to get their families’ homes back out of the trusts, others have not been so lucky.

The trust deeds state that Philips Trust should hand over any sales proceeds, but families who have sold properties still in trust are yet to see a penny.

“Devastated”, “shattered”, and “scarred” are just some of the words of relatives and friends of these victims.

So far, says Philips Trust’s administrators Kroll, £14.5m of the £15.5m bonds which have matured to date – out of the £44m total – have defaulted.

A salesman working for Philips Trust blew the whistle on the operation in October 2020, telling the Financial Conduct Authority (FCA) it was “in effect a ponzi scheme” in a letter seen by the Yorkshire Post – the first paper to expose the scandal.

The FCA launched a review, but no action was taken because the firm was never authorised and therefore fell outside its remit. Since then, the FCA has confirmed it will not investigate any of the 10 building societies that introduced customers to unregulated trusts.

It said it “can’t hold the building societies responsible for the actions of Philips Trust”. But this isn’t good enough, according to Peter Grant, MP for Glenrothes in Fife. On a call organised by the Transparency Task Force for victims, attended by The Telegraph, Mr Grant said the City watchdog “is still too willing to be persuaded by the building societies that ‘there’s nothing to see here”. He added: “We need new legislation to prevent this spider’s web and unfollowable trail… The FCA takes a very literal and narrow view of its responsibilities.”

Mrs Birtley, now 83, has a disabled son in his 40s. She has had to spend £3,500 to get her house back into her own name, but has no idea if any of her £105,000 savings will be salvageable.

She said: “My husband worked hard overseas – away from the family for most of the time – with the aim of saving enough money to ensure our disabled son could be looked after when we passed. What’s happened is not fair on me or my family.”

Mrs Birtley’s husband was a plumbing engineer who worked out in the Middle East. He passed away in 2014 from motor neurone disease. Her sonin-law, Gordon Crosthwaite, has been actively campaigning on her and other victims’ behalf.

He said every single one was over 60 when they were introduced to trusts by their building societies. “They thought the trusts were safe. The building societies didn’t tell them they weren’t.”

Mary Ledgard, the mother of John and David Ledgard, was a customer of Leeds Building Society. In 2014, she went into her local branch with her passport to take some money out for her grandchildren. While she was there, the clerk suggested she should consider writing a will – but she told them she already had one.

It was then that she claimed to her sons that the clerk warned her care homes were very expensive, and that she could lose her house if she didn’t think about putting it in a trust.

Mary died in May 2021. By November of that year, her house had sold for £180,000. Her two sons have seen none of this money, despite John being an executor of Mary’s will and a beneficiary of the trust.

He was told by Philips Trust that sale proceeds were transferred to a different customer. In the High Court, one of the firm’s former directors, Kaye Collins, admitted in her witness statement that at least £800,000 of property sales had been used to pay other customers who moved their money out of trust, rather than being transferred to rightful beneficiaries.

David Compston, a family friend who is representing the brothers, said: “What a crazy business model for a building society. It’s suicidal. They had a duty of care.”

David Turner, 59, has lost his father’s £170,000 life savings. Norman Turner, another customer of Newcastle Building Society, used to work 12-hour shifts, six or seven days a week on an oil rig construction. David barely saw him growing up.

His son said: “My father and my mother, Ann, were risk-averse. Newcastle Building Society told them it would be a good idea to put their house into trust, along with their savings, to protect themselves from inheritance tax and probate.

“Now, all their money has been lost on stupid, high-risk investments..”

Mr Turner’s parents will both turn 83 this summer. They are devastated.

Kroll, Philips Trust’s administrators, have been trying to track down customers’ money for nearly two years.

So far, they have deduced that money held by Family Trust was moved in its entirety from stocks and shares investments with popular fund management platforms into bonds with four investment management companies: Berkeley Rutherford, CX Wealth, Float and Woodville.

At the end of 2018, the role of trustee began switching from Family Trust to Philips Trust. Customers were told in letters seen by The Telegraph that Family Trust was closing down. The company is still active today and acknowledged The Telegraph’s request for comment. Sources alleged that Family Trust got a commission for every customer it moved over to Philips Trust – but the company told The Telegraph it has never received any such commission.

Building societies have pointed The Telegraph to the FCA’s official statement, that “it was the actions of Philips Trust, not the building societies, which caused customers to experience investment losses”.

The City watchdog has also highlighted that Philips Trust “did not exist at the point that the building societies referred customers to the Estate Planning Group [the umbrella firm for FTC and The Will Writing Company].”

A Newcastle Building Society spokesman said: “The society is very concerned by, and sympathetic to, the difficult situation faced by people who have been affected by Philips Trust. We have never had a relationship with, nor at any point have we referred our customers to, Philips Trust, which did not exist at the time we introduced customers to The Will Writing Company. In January 2019, we wrote to customers we understood had taken a trust with Family Trust,” the spokesman added, referring to an option the building society gave customers where they could place their assets with the Co-op instead of Philips Trust.

But because the building society said there was “no risk” to customers’ properties and assets, many say they didn’t think twice. Newcastle Building Society’s introducer arrangement with Family Trust ceased in November 2017. Despite claims from customers about what they deemed to be advice from their money managers on setting up trusts, the building society denies ever providing any advice on these products itself.

A spokesman for Leeds Building Society said: “We’re deeply saddened by what has happened to customers of the Philips Trust and the impact it is having on some current or former members and their families.

“We had no relationship or involvement with Philips Trust and never recommended the firm to customers. As the FCA concluded, it is the actions of Philips Trust that have caused the expected investment losses.

“We’re seeking to find out how many people affected by those losses were referred by the society and subsequently set up a trust which later transferred to Philips Trust. We’re doing this to better understand whether we may be able to financially support those customers impacted on a voluntary basis.”

The Financial Ombudsman Service said it “may be able to consider a complaint against a building society depending on the individual circumstances of the case”.

So far, cases brought to it by victims have been rejected on the basis that trusts are unregulated products.

BARRIE AND MARY LEDGARD

‘What a crazy business model for a building society. It’s suicidal. They had a duty of care’

ANN AND NORMAN TURNER

‘All my risk-averse parents’ money is lost on stupid, highrisk investments’

KATHLEEN BIRTLEY AND SON-IN-LAW GORDON

‘My husband worked hard overseas for the money to look after our disabled son’