A judge has advised people thinking of purchasing financial plans associated with life assurance policies to obtain independent advice before signing on the dotted line.
Judge Kevin Haugh has held in the Circuit Civil Court that Canada Life Assurance had not acted negligently or in breach of contract when it sold a Lifemaster Plus Plan to a Co Wicklow businessman to fund his children's secondary education at Blackrock College.
He said Mr Brian Laide, a company managing director, of Kilacloran, Aughrim, had lost confidence in the policy when he discovered that its value stood at much less than he had paid into it after several years.
Judge Haugh said the 14-year policy had been front-loaded with commission and other charges and he had been told by the company that such policies did not "kick in" to a higher returns status until the eighth year. Mr Laide had lost all confidence and trust in the policy, particularly after monthly increments had risen from £150 to £225 and the value of his policy was £3,000 below what he had paid in.
Mr Brian Cregan, counsel for Canada Life, had told the court the policy had performed astonishingly close to the 10 per cent per annum rate of growth set out in an illustration prepared for Mr Laide by his clients.
Judge Haugh said Mr Laide, before his first child started school, had sought a surrender value on his policy and had found to his horror he had paid in £10,600 and the value of the policy was £7,500.
Not realising that policies of this sort were very heavily front-loaded with commission and other charges, Mr Laide had felt this was a bad investment. He had felt that not only was it making no return, it was making a loss. Judge Haugh said Mr Laide eventually decided to cash in the policy for its surrender value. To cancel a medium or long-term policy which did not kick in to higher returns until its eighth year was an unwise decision. Of his total investment since 1988 of £10,600 he had recouped £9,100 in 1996. Awarding him £1,100 damages as his net loss in relation to increased premiums, the judge said he was being kind to Mr Laide in that he had, for the duration of the policy, enjoyed benefits from tax relief and free life cover.
"Many people would feel the same as how Mr Laide felt in the circumstances and I understand his disappointment in finding, after four or five years, that the value of his policy was far less than he expected.
"Although we are told much more nowadays about commission and charges than we used to be, it would be better if people sought independent advice in relation to such matters," Judge Haugh said.