Not upheld: unsuitable advice on investment bond structure / inadequate tax planning advice complaint against Zurich Assurance Ltd

Decision detail

Summary

The estates of Mr and Mrs B, represented by their son Mr B1, complained that Zurich Assurance Ltd provided unsuitable advice when recommending three investment bonds because the adviser failed to recommend including younger lives assured on the policies. Mr and Mrs B took out the bonds between 1998 and 2002, and they were subsequently placed under trust. When Mrs B died in 2023 as the second life assured, the bonds were required to be cashed in, resulting in a tax liability of £61,719. Mr B1 argued that if younger lives assured had been included, the bonds could have continued after Mr and Mrs B's deaths and the tax could have been avoided. The ombudsman found that the advice to arrange the bonds with only Mr and Mrs B as lives assured was suitable based on their recorded financial objectives at the time each bond was recommended, which focused on investment growth and capital access rather than tax mitigation. The ombudsman concluded that while including younger lives assured might have been beneficial, its omission did not make the advice unsuitable, and that it would not have been possible to add lives assured after the bonds were set up. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman assessed whether Zurich's advice to arrange the bonds with only Mr and Mrs B as lives assured was suitable based on their recorded financial objectives and circumstances at the time each bond was recommended. For bond 1, the primary objectives were savings and investment for permanent care in old age with capital access, not IHT planning. For bond 2, although IHT planning was noted, the adviser's proposal to keep capital in the estate while placing growth into trust was consistent with Mr and Mrs B's stated objectives. For bond 3, the primary aim was investment growth with capital access. The ombudsman found that in each case, the structure recommended was suitable for the stated objectives. The ombudsman acknowledged that including younger lives assured might have been beneficial for tax mitigation but concluded that its omission did not make the advice unsuitable given the clients' circumstances and aims. The ombudsman also noted that it appears lives assured could only be set up at inception and could not be added later, making the initial advice critical. While accepting that other firms may have recommended differently, the ombudsman assessed suitability based on whether Zurich's advice met the needs and aims of Mr and Mrs B specifically.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website