Andrew Warwick-Thompson answers your questions. Q I took out a Freestanding Additional Voluntary Contributions (FSAVC) policy in 1991 following advice from one of the Abbey National's independent financial advisers. Prior to signing this policy I asked the adviser if I would get a better return if I paid a lump sum rather than a monthly one. His answer was that it made little difference. However, I am now convinced that his advice was misleading and aimed at gaining more benefit for himself rather than for me.
Assuming the Abbey National do agree to compensate how do I know that what they are offering is the right amount? Who could possibly work out for me the right level of compensation? Do you think that I have been misled?
A A regular premium FSAVC contracts pay a much higher level of commission to the adviser than single premium contracts. The higher commission will be reflected in the policy charges, so you will almost certainly have been sold a policy with much higher charges than one costed to a single premium basis; the adviser therefore did mislead you.
If compensation is payable it will be calculated as the difference between the actual policy value and the value had it been set up on a single premium basis. Abbey National will doubtless calculate this itself, but to check their figures you might ask the provider of the FSAVC contract to do the calculation for you. Alternatively, an independent actuary or accountant who has relevant pensions experience would be able to help.
However, the easiest way to compensate you will be to get Abbey National to rearrange the FSAVC policy on single premium terms from the outset. They should be able to do this by negotiation with the provider, which should involve you in no extra work .
Andrew Warwick-Thompson is a lawyer who works for Bacon and Woodrow, the international firm of actuaries and consultants. Readers who wish to put questions to him (no names will be published) should write to Personal Finance desk, The TES, Admiral House, 66 -68 East Smithfield, London E1 9XY (fax: 071 782 3200). No personal correspondence will be entered into and no legal liability accepted for the advice offered.