The case concerns a client who was advised to take out an endowment policy into retirement. Royal Sun Alliance, since taken over by Phoenix Life, offered compensation on the basis that the type of mortgage was wrong but not the term.
The client referred the case to the FOS. In a provisional decision, the ombudsman said compensation should be calculated on the basis that the client should have had a capital repayment mortgage written to retirement age, provided they could have afforded to do so.
However, in the final decision, the FOS ruled that even if the customer received competent advice they would still have taken out a capital repayment mortgage written to the same term as the endowment and this would have been readily apparent at the outset.
CPH principal Michael Cooper says the final decision on compensation was in direct contrast with the provisional decision. He adds that if the customer had taken out a capital repayment mortgage written to the date of their retirement it would only have cost an extra 12 per month.
Mr Justice Blake agreed further explanation was needed and added: “The additional cost of 12 was not likely to be considered a prohibitive disincentive if properly advised.”