Bank of Ireland had faced a PR disaster as elderly investors refused to be cowed

LINDA NEWMAN from Derbyshire was one of thousands of British pensioners who breathed a sigh of relief yesterday following Bank of Ireland’s eve-of-court decision to scrap plans to force them to sell bonds bought 20 years ago for a fifth of the price.

Her mother had bought £30,000 worth of the perpetual subordinated bonds, yielding 13.375 per cent interest, from Bristol and West Building Society in 1991, which was taken over by the Bank of Ireland in 1997.

Last year, her mother died. “My brother got the house. I got the bonds. Then I got the letter from the Bank of Ireland saying that they were talking the bonds off us. I literally fell through the floor the night I got that letter telling us that,” she told The Irish Times yesterday.

The bank had faced a PR disaster in London today because pensioners, including Glaswegian Albert Kempster – the man who took the legal action on behalf of others – had been prepared to protest outside the court.

Welcoming the bank’s retreat, Mark Taber of Fixed Income Investments Information said the bank should never have tried to include the pensioners in the subordinated bond “haircut” in the first place, since they were retail and not institutional investors.

“It has taken a monumental effort by a huge number of bondholders and a huge risk by one pensioner to resolve the issue, which should have been dealt with by the regulators. There were 3,000 people involved in this, but there are millions of similar investors.

“It simply isn’t acceptable that regulators allow these things to get ahead,” he went on, particularly since the pensioners had never been given the opportunity to accept a more generous offer made to institutions last year.

Bank of Ireland said it intends to make a new offer to the pensioners “at a future date” but it promised that it would “seek to address the unique difficulties” facing people who deliberately invested in the bond to have a guaranteed retirement income.

Taber insisted the warnings that a vulnerable group was threatened had been voiced to Bank of Ireland. “There were 461 pages of tender documents that made special references to these bonds,” he said.

Liberal Democrats MP John Hemming, who is one of a number of people still working who bought the bonds, said he did not believe that Bank of Ireland had started out “deliberately to have a go at pensioners”. But Bank of Ireland was always going to face pressure on the issue, he said, pointing out that a House of Commons motion had already been tabled on the issue, while it was open to commercial pressure because it holds the post office banking concession in the UK.