The Financial Ombudsman Service has ordered Sanlam Life & Pensions UK to compensate a client it believes was mis-sold a savings plan in 1988.
The client paid £50 in premiums each month for the plan, which was intended to meet a long term savings objective and expected to reach its optimum performance after around 25 years.
However, the client claimed he surrendered the plan in 1994 when he realised its performance was "very poor".
Represented by a claims management company, the client brought his complaint to the ombudsman and claimed a shorter, but extendable, 10-year plan should have been recommended instead.
The claims management company argued despite the sale of the plan taking place pre-A Day, before regulation meant suitability had to be assessed, the adviser still had a duty to advise with reasonable skill and care and disclose material information.
The ombudsman upheld the client's complaint and noted a 25-year savings commitment was not likely to have been a "reasonable fit" for a 26-year-old who might need a degree of flexibility with their finances as circumstances changed.
In response, Sanlam argued the ombudsman should consider the complaint in the context of 1988 suitability requirements - not those introduced alongside pension simplification in 2006.
The advice firm also argued the client's professional background suggested he was not an "ordinary" consumer and would have been capable of making his own financial decisions and to understand how the product worked.
Despite Sanlam’s objections, the ombudsman upheld his ruling in support of the client and dismissed the weight given to his career circumstances at the time as "quite speculative".
Ombudsman James Harris said: "I note what Sanlam has said about me having considered the matter in the context of the ‘suitability’ requirements that weren’t introduced until A-day, in April of 2006.
"But I disagree. I’ve simply looked at whether it seems likely, on balance, that Mr F was sold a product that was a ‘reasonable fit’ for his circumstances.
"And given his age at the time, coupled with the fact that he surrendered the plan after only a few years, I don’t think it was."
Mr Harris directed Sanlam to compensate the client by calculating what a 10-year investment plan would have been worth at the point of surrender in November 1994 if funded and invested in the same way as the savings plan.
He said: "If there is a difference, Sanlam should pay that amount to the client, plus interest at 8 per cent simple from the date of surrender to the date of settlement."