Financial Ombudsman Service 

Fos rejects time bar defence in case brought by CMC

Fos rejects time bar defence in case brought by CMC

The Financial Ombudsman Service has rejected a time bar defence given by Sanlam Life & Pensions UK Limited in the case of two mis-sold whole-of-life policies.  

In a decision upheld in April the advice firm has been ordered to compensate a client for unsuitable advice given in 1990, when its predecessor business recommended he take out two whole-of-life policies. 

Then aged 24 and living at home with his parents, with no dependents, the claimant invested £2,000 in a single contribution plan which invested in units in a managed fund in 1990.

The claimant then started a regular contribution whole-of-life plan, also invested in the managed fund, paying a premium of £20 a month for an initial cover amount of £47,250. 

He paid these premiums until mid-1991, with the policy lapsing at the end of that year, and surrendered his single contribution plan in 1992 for which he received £1,836. 

Last year a claims management company complained on the client's behalf that the plans had been mis-sold, but Sanlam maintained the complaint had been outside the permitted time limits. 

Sanlam said it had written to the client in 1995 offering a review of the advice, but received no response. 

The advice firm initially said this should have made the client aware that he had "cause to complain" but he failed to raise his concerns within three years. 

However, the ombudsman rejected Sanlam's time bar defence and held inviting the client to have his plans reviewed was "not enough to make him aware there was a potential problem with the advice he received". 

The ombudsman upheld the complaint finding the advice was not suitable for the client's circumstances, which she said were likely to have changed in the future. 

She said she did not think the client had any specific need for life cover.

Ombudsman Cathy Bovan said: "The capital programme was described as a medium long term investment, but it did allow for access to the money by cashing in part of the investment.

"However, I said the client surrendered it at a loss less than two years after it started.

"Although I could see why he may have wanted to save for the future, I didn’t consider the capital programme gave him sufficient flexibility in access to his money, and placed a high level of his savings into a unit-linked investment.

"Considering his income and outgoings at the time, he didn’t seem to have much capacity to have made up any losses on his money.

"Although the benefits could have been used towards funeral costs, or to help Mr M’s parents, but I didn’t think that meant that having this level of whole-of-life cover with premiums needing to be maintained throughout his life was right for him."

The ombudsman ordered Sanlam to redress the claimant for the single contribution plan and refund all premiums paid on his regular contribution whole-of-life plan, with interest.