DAG Press Release 6 October 2009: The misery continues for Bondholders with deposits in KSFIOM

Category: DAG Press Releases

The misery continues for bondholders with deposits in KSFIOM One year on please take a moment to read of bondholders’ continuing plight:

In discussions with his financial adviser, Jonathan specified a RISK FREE home for his money that was why he was in a simple cash deposit, not in the markets. £125,000 ended up on deposit with KSFIOM via a life company bond. This episode has postponed his retirement and resulted in his youngest son missing out on private school. It was not explained to him that as a bondholder his deposit was pooled into one account in the name of the life company and therefore compensation was minimal and shared between all the individual account holders. He thought he had the protection of an insurance based product, having stipulated a no risk investment. Jonathan tried to move his money post-Lehman when he discovered to his horror that it was in an Icelandic Bank. It never happened. He has appointed solicitors and is taking action via the Financial Ombudsman.

Nigel and Anne placed their life savings and the proceeds from the sale of their business in the UK (sold for health reasons since Anne had suffered with cancer) in a life company bond based on their IFA's recommendation that this was a good investment. Shortly afterwards they received a letter from their IFA that instructions had been provided to place 95% of £294,000 with KSFIOM and the remaining 5% in a Cash fund.  Their IFA assured them that KSFIOM was an extremely sound Bank, that all the relevant ratings were excellent, and that they could bank there with confidence.  They are currently consulting lawyers as to how best to proceed with action against their IFA and/or life company . As a retired couple they were depending on this money to finance their future and have no other means of income. It has been a small relief receiving the first payout, however, they are extremely unhappy to discover that they cannot pull out all their money due to tax implications, even though Capital Gains Tax was paid on the funds prior to it being placed into the bond.

John had SIPP pension monies totalling over £600,000 which his IFA recommended should be invested in offshore bonds. His IFA presented this as an offshore insurance company product to be further invested into Kaupthing Singer & Friedlander. No mention was ever made that this was an Icelandic Bank. He was advised he could withdraw funds with no exit penalty. He decided to exercise that right at the end of September 2008 and was advised only at that stage there would be 90 days penalty on interest but still decided to proceed to withdraw funds. He was then told a few days later by the insurance company & his IFA that KSFIOM would not release the funds because of terms & conditions between KSFIOM and the insurance company and that KSFIOM were within their rights to have that discretion. This has dramatically affected John’s pension income and availability of the 25% cash payments on which he was fully depending to survive as the value of his pension fund was reduced to a nominal £1. John is now left with little pension income and is depending on family support. He has started legal proceedings against his IFA.

One year on and depositors in Kaupthing Singer & Friedlander Isle of Man have only just received up to 24.8% of their money back. This includes the life companies (1) who had placed bondholders’ money in this bank which was promoted in three important ways:

  1. Under the name Singer & Friedlander or ‘Singers’
  2. Holding strong ratings from both Fitch and Moody’s
  3. Offering a 100% parental guarantee

Bondholders feel misled by the industry as a whole as they were sold products that were promoted as offering capital security, low risk and regular income potential. The complete opposite has proved to be true.

One year on and bondholders who are part of the KSFIOM Depositors Action Group have had enough.

Their plight remains unheard since they feel isolated and alone with a complicated financial situation and little hope of full recompense.

  • Communication from life companies has been slow, inadequate and totally lacking in any form of understanding for their current plight.
  • Charges continue to be taken from bondholders at a rate based on their original deposit value rather than that now in their bond.
  • Attempts to withdraw money are met with even higher charges or surrender fees plus complicated tax implications.

Since ‘the industry’ apparently knew that Iceland was at risk in early 2008 why is it that examination of bondholders amongst the DAG shows that a very large number of deposits were placed with KSFIOM during 2008, earning IFAs huge commissions and life companies’ considerable fees?

They also knew for sure that there was trouble ahead when KSFIOM stopped honouring transfer requests after 1st October 2008. Why did they do nothing to secure the fate of bondholders’ monies before the demise of the bank on 8th October 2008?

(1) The life companies involved include Aegon, Prudential, Friends Provident, AXA, Hansard, Royal Skandia, Norwich Union/AVIVA, Clerical Medical, Legal & General, Canada Life

(2) Bondholder names have been changed to preserve privacy. Case studies expressed using bondholders’ own words. Many other case studies sadly available.

For further information please call 020 3286 3458 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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