Lloyds admits to mis-selling Investments when ordinary savings accounts would have been better for the customer.

An Investment complaints team has been set up to investigate investments that had a poor rate of return against an ordinary savings account. LLoyds investment team will focus on :

  • Were in, or near, retirement;
  • Had never invested in the stock market before;
  • Were pursued by salesmen after receiving a cash windfall;
  • Told to invest a large portion of their life savings.

Anyone found to have been mis-sold will be compensated for lost interest compared to the returns they would have earned in an ordinary cash savings account.

Products under review include:

  • the Scottish Widows Capital Protected Fund 5
  •  the Protected Capital Solutions Fund
  •  Guaranteed Investment Bond.

We did mis-sell, admits Lloyds: Customers flogged complex investments when a savings account would have been better

One in four cases in a damning dossier of investor complaints was mis-sold, Lloyds has admitted. The file was handed to the bank by Money Mail two weeks ago.

The State-backed bank is now in the process of paying thousands of pounds in compensation to the victims — mostly vulnerable and elderly — who were sold fiendishly complicated structured products. But the payouts could be just the tip of an iceberg for Lloyds, as internal documents seen by Money Mail reveal another 6,000 policies have matured over the past seven days with shoddy returns.

In a meeting with our reporters, senior Lloyds executives accepted that Scottish Widows investments may have been widely mis-sold by its branch advisers between 2007 and 2012. A special complaints team will now review every policy that ends with a poorer return than a run-of-the-mill savings account. A full sales review like this is highly unusual and follows Money Mail’s call for action after raising the alarm last month.

Two weeks ago, we compiled a dossier showing how dozens of loyal Lloyds customers had been duped into risky investments that failed miserably. We then sent it to Lloyds group chief executive, Antonio Horta-Osorio, and the head of the Financial Conduct Authority (FCA), Martin Wheatley, for investigation. The FCA is the new watchdog for the City.
Our dossier detailed how cautious savers in their 60s and 70s were snared by the slick sales patter of branch advisers, who promised returns as high as 75 per cent and complete capital protection.

These wild predictions never materialised:

Many who invested £40,000 five years ago have got back just £300 extra and now face hardship in old age. By contrast, the bank pocketed giant commissions of £2,000 on each £40,000 fed into complicated funds called structured products. Had a £40,000 lump sum instead been put in a High Street cash savings account — which paid up to 6.35 per cent before tax in 2007, but generated no kickback for banks — savers would have earned £13,000 in interest.

Over the past two weeks, Lloyds has worked tirelessly to investigate every case we handed over, calling customers at home to discuss their complaint. But these initial probes may only be scratching the surface of a mis-selling scandal affecting the whole country. Internal sales documents seen by Money Mail show a further 5,933 policies matured last Thursday, April  4, with thousands more expected in the coming months.

Every customer signed up to the deal — called Scottish Widows Capital Protected Fund 5 — will get a poor payout because the returns are based on the performance of shares in the FTSE 100. If this index fails to rise steadily, savers risk getting back no more than their original outlay.

The FTSE 100, which stood at 6,046 when the policies began, has wobbled violently over the past five years and finished only fractionally higher when the policies ended. In total, 25,616 Capital Protected Fund policies sold in 2007 have matured in the past six months — 13,386 last October, and 12,230 in January.

Other risky structured products sold by Lloyds from 2007 include the Scottish Widows Protected Capital Solutions Fund, which has had 2,827 policies mature so far, and the Scottish Widows Guaranteed Investment Bond, which has had 8,551 mature since May 2012.
Many of these complex deals failed to meet a series of strict targets, leaving savers with pathetic returns. This week, Money Mail met Alison Brittain, head of retail banking at Lloyds, and Martin Dodd, head of complaints, to ensure mis-selling victims are fairly treated. We also handed over a second batch of complaints.

Mrs Brittain promised a complete review of structured product sales. A special complaints team, led by Mr Dodd, will telephone every suspected victim of mis-selling to establish whether the product was suitable, or if poor advice was given. If the investment was mis-sold, the bank will pay compensation equivalent to the return on a cash savings account, seen as the Bank of England base rate over the period plus one percentage point. Lloyds says its review will target the ‘most vulnerable’ customers. In particular, this means people for whom risky investments were inappropriate because they were older and relying on the cash for retirement; customers who’d never invested in the stock market before; and those advised to put a large proportion of their nest egg into structured products, rather than spreading it out.

All those who write to Money Mail or complain direct to Lloyds or Scottish Widows in a letter or branch will be passed on to the specialist team. But experienced stock market investors and wealthier customers who could afford a risk will be excluded from the review, as they are deemed to have understood the dangers.

The bank has also promised to look into allegations that salesmen misled customers over how the charges worked on these deals. Lloyds will investigate any potential mis-selling after each batch of structured products matures. Mrs Brittain says: ‘We will strive to deliver fair outcomes for all our customers and will assess each case on an individual basis.’

Money Mail : www.dailymail.co.uk/money/investing

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Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim

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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.