Not upheld: Investment mis-selling complaint against Cirencester Friendly Society Limited

Decision detail

Summary

Mr and Mrs C complained about their 1987 CFS Friendly Society income protection and savings policies, claiming they would only pay a fraction of promised amounts after 32 years. They raised concerns about non-disclosure of IFA relationships, unclear communications, failure to alert them to poor performance, and inability to meet mortgage repayment goals. The ombudsman found the policies operated as Friendly Society memberships where members purchased shares guaranteeing income protection, with bonuses distributed annually from pooled contributions. Original illustrations used industry-standard assumptions (£180 annual dividend, 10% growth) that were explicitly stated as non-guaranteed. Annual statements from 1990 onwards showed actual bonuses differed from illustration assumptions, making clear the projection was not being met. CFS had no duty to proactively review the policy or provide additional alerts, and communications were clear, fair and not misleading. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that the policy operated fundamentally differently from endowment or whole-of-life policies. Members purchased shares guaranteeing income protection, with premiums pooled and used for claims, charges, and reserves. Any surplus was distributed as bonuses/dividends to members based on shareholding. The original illustrations used industry-standard assumptions (£180 annual dividend, 10% growth) that were not guaranteed. The policy documents clearly stated illustrations were guides only and maturity values were not guaranteed. Annual statements demonstrated from 1990 onwards that actual bonuses differed from the illustration assumption, making clear the projection was not being met. CFS had no duty to review the policy proactively as it was not a reviewable product. The IFA, not CFS, bore responsibility for explaining suitability. Communications were clear, fair and not misleading given the annual statements and policy wording emphasizing only the income protection was guaranteed.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website